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Lehman Looking Strong On The Repo Front

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by Felix Salmon
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The Scramble to Save Bear   The Price-to-Book League Table, Revisited

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Mar 18 2008 12:00am EDT

Lehman: Looking Strong on the Repo Front

If you thought a price-to-book league table was arcane, wait till you see what Heidi Moore has come up with: an excess-liquidity-and-other-unencumbered-collateral-to-total-repos league table! I'm impressed.

As Heidi explains, the proximate cause of Bear's collapse was the fact that its repo lines were withdrawn, so the ratio of liquidity to repo lines is important: the higher the better. And this is where Lehman looks much stronger than Bear. Bear's ratio here was 33%: it had three times as many repos as it had cash. Lehman's ratio, by contrast, is 107%: it could lose all its repos and still have cash left over. Yet more reason to believe the worst of the crisis is over.

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