Economist Says Big Bank Will Fail: Could it be Lehman?

It seems that former IMF chief economist Kenneth Rogoff has his crystal ball out and is making some heavyweight predictions.

"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004.

Too bad he doesn't have any specifics or actual numbers to back up his claim. Is he saying it might be Lehman, maybe AIG, or who is he thinking of? It seems to me that Citigroup, Wells Fargo, and Bank of America are doing okay judging by the numbers this past quarter. It probably wouldn't be Goldman Sachs or JP Morgan since they seem to be okay for the most part. He says US bank as well so UBS seems to be safe in his view.

However I think Lehman will be Rogoff's "whopper" according to this.

Lehman Brothers is exploring the possibility of selling a stake in its investment management arm in an attempt to bolster its capital position in the wake of the continuing credit crisis.

The investment bank, led by chairman and chief executive Dick Fuld, is sounding out potential interest in the division, which includes the Neuberger Berman business which it bought for $3.1bn (£1.66bn) in 2003.

The assets included in the possible sale are also believed to be certain parts of the bank's private equity and hedge fund businesses.

This move seems to me to be like Activision selling off certain popular gaming franchises just to stay afloat. Lehman's Investment Management arm brought in $1.8 billion in revenue in the last 6 months and provided a 24% revenue growth YoY. It seems to be the only thing that made any money this past quarter.

Actually judging from these numbers this move would be more like Activision selling off the Guitar Hero or Warcraft franchise so they have enough capital to stay in business. It might keep them going for a while but it might competitively damage them in years to come. This move by Lehman really seems to smack of desperation IMO.

I think all it would take to kill them off is a bunch of big money guys pulling their cash out of their Lehman accounts at the same time. We might even see another Bear Stearns style bailout of Lehman going forward.