WALL STREET – The financial markets ware expected to be rocked again this morning by a bankruptcy filing by Lehman Brothers Holdings, the venerable brokerage that has deep financial ties throughout the credit union industry and the entire financial markets.
The moves comes just a week after the federal government took over Fannie Mae and Freddie Mac, calming the vast secondary mortgage market, of which Lehman is the third largest player, behind the two government sponsored enterprises.
Lehman is the largest issuer of so-called private label mortgage securities, which have contributed billions of dollars in losses to corporate credit unions in recent months and a bankruptcy filing is expected to roil the markets even more.
Private label mortgage securities have become increasingly popular among credit unions, especially among corporates, in recent years, often paying premiums above so-called agency bonds, those issued by Fannie Mae, Freddie Mac, Ginnie Mae or other government enterprises.
NCUA Friday acknowledged the exposure of corporates and the potential risks but would not discuss details. "NCUA continues to carefully monitor all credit union investment activity during this period of market volatility," said John McKechnie, chief spokesman for the federal agency.
A bankruptcy filing by Lehman, which would threaten the entire mortgage securities market, would come after federal regulators and Wall Street firms failed over the weekend to find an emergency buyer for the 158-year-old firm and the federal government proved reluctant to engineer another government bailout.
The Lehman failure also comes as other major financial institutions are teetering. Bank of America was reported to be in talks yesterday to acquire Merrill Lynch; and both insurance giant AIG and thrift Washington Mutual, also major players on the mortgage market, were working to resolve their own crises.
Lehman has other ties to the credit union industry, including the private-label student loans, known as CU Student HELP, the company’s Lehman Brothers Bank markets through dozens of credit unions.
