The Federal Reserve, seeking to prevent the collapse of another Wall Street investment bank a la Bear Stearns, quietly called one major bank to see if it had pulled a credit line from Lehman Brothers Holdings, according to The New York Times.
In July, Credit Suisse Group planned to pull a line of credit from Lehman in response to rumors. The Federal Reserve contacted Credit Suisse, who told officials there was no truth to the rumor and they had no plans of pulling the line of credit.
Lehman, meanwhile, fealing with a floundering stock price and reportedly under pressure to raise capital in advance of a mid-September earnings report, s debating whether to sell a piece of the investment-management firm that includes Neuberger Berman.
The Financial Times reports today, citing sources, that Lehman CEO Dick Fuld held “secret talks” this month to sell up to 50 percent of its shares to parties in South Korea or China.
Against that backdrop, the Fed continues to investigate as it has assumed the apparent role of moral authority in preventing groundless speculation from threatening the credibility of banks. In the case of Credit Suisse, it marks an unusual move as the Fed, while working to maintain market stability, also does not want to pressure lenders and trading partners to stick by failing institutions.
Lehman executives have previously spoken out against the negative speculation and also called individuals it believed to be spreading rumors and those trading desks said to be reluctant about doing business with the investment bank, according to the NYT.