LEH to die slowly

Almost as surreal as the idea that private equity might be about to bail out the GSEs (because as everyone knows, the problem with the GSEs is that they just aren't leveraged enough), BBG has just reported that the Korean Development bank is very close to taking out LEH afterall. Honestly. Korean bureaucrats running the risk-taking, swashbuckling and once mighty Lehman Brothers. I struggle to imagine a worse fit. My guess is they'll kill it in half the time it took Dresdner to kill Kleinwort Benson ... let's say five years?

The lending capacity in the world right now is more reflective of how outsized the credit bubble, which took a generation to inflate, eventually became than it is of the actual demand for loans. And while we've probably seen the inflation peak for this cycle, I reckon it's now a structural problem. Interest rates will be trending higher not lower, and the GDP+ business model of leveraging everything up because interest rates were in secular decline is now going into a reverse. That will likely last another generation and only the smartest and most far sighted banks will survive. I struggle to see grey-suited South Korean committee guys succeeding. Of course, Fuld has no choice. The sophisticated bankers that got LEH into is current condition in the first place had already screwed it up.