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Monday, September 22, 2008

Wall Street mess trickles down to the farm

The financial problems that rocked Wall Street in recent weeks are finally starting to come home to roost on the farm. Farmer Mac, created by Congress to provide a secondary market for ag mortgages, may have to write off $48 million in bad debt, as a result of last week's bankruptcy by Lehman Brothers. In a filing with the U.S. Securities and Exchange Commission on Monday, Farmer Mac said it owned $60 million in Lehman Brothers debt that was currently valued at 19% or less. "There can be no assurance that the value of the Lehman debt securities will not decline further," the company said in its filing. The debt is classified as senior, which means its holders will be at the front of the line of creditors in the bankruptcy of Lehman Brothers, which collapsed in the subprime mortgage crisis that culminated late last week in the government's proposed $700 billion bailout. The pricetag for the entire commitment, including insurance giant AIG, Bear Stearns, housing lenders Fannie Mae and Freddie Mac, and other companies comes to more than trillion dollars. So far... In addition, Farmer Mac said it could not guarantee it will be in compliance with its statutory minimum capital requirements at the end of September. Regulated financial institutions, such as banks, typically have capital requirements they must meet, which many former free-wheeling Wall Street firms will now be facing. Merrill Lynch last week agreed to be acquired by Bank of America, while Goldman Sachs and Morgan Stanley, the last remaining investment houses, are basically turning themselves into commercial banks. More here.

posted by CASFS 2006 @ 11:17 PM

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