Today's Business Press

Lehman’s Secret Talks

Is Lehman Brothers Holdings Inc. plotting a Far East bailout? The Financial Times believes so. On Thursday it breaks the news that the troubled investment bank held separate secret negotiations in the first week of August to sell half its shares to Chinese and Korean investors, but the deal soured over price. Citing “New York-based people familiar with potential buyers,” the FT reports Lehman approached the government-owned Korea Development Bank and China’s Citic Securities. The talks went further with the South Koreans but ultimately collapsed over a price tag that amounts to 50 percent above Lehman’s fast-dwindling book value, FT contends. The bank is not talking.

The FT piece sent news wires scrambling on Thursday morning. Both Dow Jones and Reuters
shot down the China angle. “We had no such talks as far as I know,” Citic Securities Board secretary Tan Ning told Reuters. Neither wire was able to get KDB to comment on the record. And Lehman, as is to be expected, wouldn’t shed any light on the speculation, either. With the shares in Lehman already down 79 percent this year, any market rumors about the troubled invesment bank have become a sensitive topic for traders. The Federal Reserve Bank, too, is keeping a close watch on idle Lehman chatter, the Wall Street Journal reports. Last month the Fed called around to verify rumors hitting the street that Credit Suisse Group had pulled a line of credit for Lehman. It is “an apparent attempt [by the Fed] to prevent a repeat of the cascading rumors that helped sink” another troubled firm, Bear Stearns, earlier this year, WSJ says.

Customers of the
failed lender IndyMac learned on Wednesday that the federal regulators now in charge will allow them to take out lower-priced, fixed-rate loans to avoid defaulting on their mortgages, the Los Angeles Times reports. The plan, introduced by new IndyMac administrators at the Federal Deposit Insurance Co., is aimed to support about 25,000 mortgage holders on the brink of defaulting by offering interest rates as low as 3 percent, LAT writes. This is by no means an open-ended ticket out of debt. As part of the FDIC arrangment, IndyMac mortgage holders “would have to share the future gains in their home prices with the government,” NYT points out. The lifeline buys the FDIC time to sell off IndyMac assets by mid-October, the Washington Post adds.

Chinese consumers in July became Japan’s best customers, sparking a healthy rebound in Japanese exports, new government data show. “
China displaces U.S. as Japan’s Biggest Customer,” blared the headline on MarketWatch. Japanese shipments to the United States fell 11.5 percent month-on-month, the 11th straight decline, Marketwatch points out. Exports to China, meanwhile, were up 16.8 percent to $11.8 billion, nudging out the United States for the first time ever.

The BBC reads the numbers a different way, reflecting on Japan’s declining trade surplus, which now stands at $830 million. It is
the weakness in U.S. demand, plus stubbornly high oil prices, that is chipping away at Japan’s trade surplus and has it on the verge of a recession, the BBC points out. The outlook for the Japanese economy “essentially hinges on a recovery in the US economy,” JPMorgan analyst Masamichi Adachi told the BBC.

Germany is one step closer to introducing
a controversial bill that would protect strategic national industries and companies from unwanted foreign investors. It wasn’t easy. The government on Wednesday “braved hefty protest from business” in approving the draft legislation, the FT reports from Berlin. The fear is that a more protectionist regime could scare off foreign investors, which have already injected $644 billion into the economy and employ 2 million people, the FT points out, citing a German labor official. Germany’s economics minister, Michael Glos, defends the measure to the Guardian. Glos says, ” [M]ost overseas investors would be unaffected by the ‘foreign economy law’ and Germany ‘is and remains open’ to them.”

China’s Xinhau news agency points out that
the German foreign funds cap is actually based on a “U.S. model”—others peg it as modeled on the U.S. Committee on Foreign Investments—and that it “could lead to further attempts across the 27-member EU aimed at blocking foreign investment incursions into sensitive industries.” Perhaps. German labor officials tell the FT they believe the law, which would allow Germany to veto any foreign acquisition that amounted to more than 25 percent of a German company, violates EU trade laws.

Can a comedy team of Jerry Seinfeld and Bill Gates help Microsoft steal a bit of hip cachet from Apple? The Redmond-based
software giant hopes so, as it plans next month to roll out a massive $300 million ad campaign featuring Seinfeld. The ads will carry the tag line “Windows, not walls,” to “stress breaking down barriers that prevent people and ideas from connecting,” the WSJ reports. Seinfeld will appear alongside Gates and will get paid $10 million for his work. Apple may already have Microsoft beat on the “cool” front, however. Some American universities, including the University of Maryland and Oklahoma Christian University, this fall will be giving incoming students new iPods and iPhones as a way to show off their high-tech chops with the new recruits, the NYT reports. For Gates and Seinfeld, talk about a tough crowd.