"I feel like I'm playing whack-a-mole every day."
That's the WSJ's lead quote reportedly uttered by Lehman Bros. boss Richard Fuld as he struggles to keep his 158-year-old investment bank from sinking, and his job intact.
Neither is certain, even after Wednesday's announcement that Lehman would spin off the "vast majority" of its commercial real estate assets to raise capital in the wake of announcing a $3.9 billion third-quarter loss. The NYT's Fuld story quotes analysts saying Fuld "could be pushed out any day."
Lehman shares fell 40 percent more in premarket trading this morning as analyst downgrades kicked in.
Citi's Prashant Bhatia lowered his rating to "hold" from "buy." Goldman Sachs's William Tanona cut Lehman to "neutral" from "buy."
"Management did not successfully put to rest the issues that had been pressuring the stock," he wrote, "and with significant uncertainty remaining about the firm's future initiatives, we moved to a 'Neutral' rating."
Also, Lehman may be splitting itself into "good" and "bad" banks, but markets still need to worry about the health of large chunks of those bad commercial real estate assets. After tens of billions in write-downs, we don't know yet where it ends.
FT's Alphaville says the Lehman spinoff will shift to "hold to maturity" accounting to keep "mark to market" from causing the company to sell into a falling market.
Bruce Packard of Pali International pointed out in a note to clients on Thursday that Pali's Japanese desk has been arguing for some time that with several hundred billion dollars in writedowns still to come across a broad range of assets, the only way out will be for a change in the interpretation of fair value accounting rules.
Accounting changes buy time for Lehman to work out its problems. It's a bit like the bank revamping terms of a subprime mortgage instead of foreclosing.