Investigators Said to Take Closer Look at Lehman

The latest regarding the financial crisis facing America.

According to the NY Times:

Federal prosecutors from three regions have stepped up their investigations into the collapse of the investment bank Lehman Brothers, issuing at least at least a dozen subpoenas including one to the chief executive, Richard S. Fuld Jr., people close to the matter said Friday.

Federal prosecutors in Brooklyn, Manhattan and New Jersey are all examining events leading to Lehman’s collapse and subsequent bankruptcy filing, these people said.

One focus for prosecutors, according to one person close to the matter, is whether Mr. Fuld or other Lehman executives made misleading statements about the bank’s condition to investors who took part in a $6 billion capital raising announced by the bank on June 9.

The New Jersey Division of Investment, which took part in the capital-raising, has received a subpoena, according to a person with knowledge of the matter. William Clark, director of the investment division, did not immediately return a call for comment.

Representatives of all three prosecutor’s offices declined to comment.

Take note if you are following these events online.

The existence of the federal investigations and subpoenas was disclosed at a federal bankruptcy hearing on Thursday by Harvey R. Miller, a lawyer at Weil, Gotshal & Manges who represents Lehman Brothers.

The bank raised the $6 billion in June at the same time that it announced a $2.8 billion loss that stunned Wall Street. The loss, after repeated assurances by bank executives that Lehman’s finances were sound, set off a plunge in the bank’s share price.

In the days that followed, Mr. Fuld reassigned the president, Joseph M. Gregory, and chief financial officer, Erin Callan, as he tried to restore confidence in the bank.

The investment bank sought bankruptcy protection in mid-September after a frantic last-minute effort failed to find a buyer or get a government bailout.

Some people are buying, some are selling. How does this effect you as an investor?

Citigroup Shares Drop

Can't stop following the financial drama in the news tonight.

Shares in Citigroup Inc. fell sharply Friday after the bank's deal to buy Wachovia Corp.'s banking assets for about $2.1 billion was trumped by an offer from Wells Fargo & Co.

Citi shares lost $4.15, or 18.4 percent, to close at $18.35. In the past year the stock has ranged between $12.85 and $48.95. Wachovia shares soared 59 percent on the new deal, which will pay shareholders about $7 per share, or about $14.8 billion.

The bank had agreed to absorb as much as $42 billion in losses from Wachovia's $312 billion loan portfolio. The Federal Deposit Insurance Corp. agreed to cover losses above that level. The Wells Fargo bid does not include any government guarantees.

Citi is balking at the deal, saying it had an exclusivity agreement that precluded Wachovia from talking to other suitors.

People are being very careful with what they are doing with their money right now.

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