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Rumour That Big US Investment Bank Is Going Belly Up

last updated: 22 August 2007
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Rumours are sweeping Wall Street that a large US investment bank, thought to have taken a huge bath in the recent market turmoil, is going to go belly up and file for Chapter 11 bankruptcy protection.

Thomson Financial quotes one unnamed trader who said that 'we've heard vague talk a US investment bank is in trouble'. However many are dismissing the rumour as just that, pointing out that there would surely have been some kind of announcement by market regulators if a Chapter 11 filing was in the offing. That might not be the case, though, as regulators would want to manage any such announcement in a way to does not create even more market panic. Some feel that, behind the scenes, regulators might now be working to arrange a bail out or takeover if a big player is really in trouble. Another trader said that 'the market is so nervous at the moment, I think it's just rumour following on from rumour. (However), I don't think anyone know's what's going on'.

The rumours did, however, have an effect on the market Tuesday as US futures initially moved lower. And one of the reasons that some feel that there may be something to this rumour is that the big three US financial markets policeman, Treasury Secretary Hank Paulson, Federal Reserve chairman Ben Bernanke and Senator Chris Dodd were locked in a meeting Tuesday. Business as usual, or another market crisis ?

And big firms can go bust - Baring did a little over a decade ago, thanks to one Nick Leeson.

If anyone knows anything about these rumours, please mail us in confidence at news@hereisthecity.com

READER COMMENT

'I think that the rumours are untrue. If the Fed had not cut the discount rate Friday there may have been a couple of US firms in the frame for Chapter 11. The fact that they did cut got whoever it was out of the mess'.

'I hear that it's Origami Bank that has folded!'.

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