Riley McDermid

MarketWatch

March 17, 2008

NEW YORK (MarketWatch) — Analysts who cover broker Lehman Bros. were laying low Monday, saying they did not want to add to market speculation that the firm may be the next major brokerage under the gun.

“All of the investment banks rely on repurchase agreements to fund a significant amount of assets. If market participants begin to fear that another bank is facing a liquidity crisis, we could see another collapse,” said Morningstar analyst Ryan Lentell in a research note.

“Rumors of problems at Bear gained traction because of the bank’s exposure to the residential mortgage market, which has been in turmoil,” Lentell said. “The investment banks all have exposure to these asset classes, and as fear over further price declines in any one asset class escalates, it could lead to a run on another bank.”

Shares of Lehman Bros. temporarily recovered some of their early losses Monday as the broader markets calmed down after being rattled by an eleventh-hour bailout of rival Bear Stearns. But after rebounding to a smaller 14% loss, Lehman fell back to a loss of more than 30%.

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