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By JOE BEL BRUNO and MARTIN CRUTSINGER, AP Business Writers 6 minutes ago

NEW YORK - As the outlook for Lehman Brothers dimmed Sunday, U.S. and foreign banks were pressed to create a plan aimed at inoculating the global financial system against the investment bank's failure, a top investment banking official said.

Banks were in tense talks to create a pool of money worth up to $100 billion to lend troubled financial companies, the official said on condition of anonymity because the discussions were ongoing. And officials at the U.S. Treasury and the Federal Reserve were expected to announce they are prepared to be more generous in the Fed's emergency lending program for commercial and investment banks.

 The exterior of the world headquarters for Lehman Brothers is seen in New York September 12, 2008. (Shannon Stapleton/Reuters)

Reuters Photo: The exterior of the world headquarters for Lehman Brothers is seen in New York September...
The plan comes as top government officials and Wall Street executives held marathon, but so far fruitless, meetings to save Lehman Brothers, and amid signs that the 158-year-old investment bank might be forced to seek bankruptcy protection and liquidate. The company's shares have plunged 95 percent in the past year over worries that it does not have enough money to cover losses from its massive real estate holdings.

The official also said the Treasury Department and the Fed were pushing Bank of America Corp. to buy Merrill Lynch & Co. On Friday, Merrill Lynch's shares fell as investors fretted it might be the next investment bank to come under pressure from its portfolio of risky mortgage-backed securities.

Expectations that the 158-year-old Lehman would survive dimmed Sunday afternoon after Barclays PLC withdrew its bid to buy the investment bank. Barclays and Bank of America were considered front-runners to buy Lehman, which is foundering under the weight of $60 billion in soured real estate holdings.

The Lehman talks originally were aimed at selling the investment bank in whole or in part. The deal was tripping on the potential buyers' insistence that they receive the same kind of help that Bear Stearns Cos. got last March when JPMorgan Chase & Co. bought the securities firm with a $29 billion Fed-backed loan.

Treasury Secretary Henry Paulson has said the government will not help close a Lehman deal, and it was clear late Sunday he was not budging.

Lehman declined to comment on the talks.

If no deal were reached, it raised the specter of a bankruptcy and liquidation of the investment bank, which in turn could have a tumultuous effect on world markets. Late Sunday, Dow Jones industrial average futures were down 276 points, or 2.4 percent, at 11,182.

Traders and bankers across Wall Street came into the office Sunday to prepare their departments for what is expected to be a brutal day in the market. JPMorgan employees who work trading desks were asked to come in at 7 a.m. EDT, way before the market's 9:30 a.m. open.

An employee at Lehman Brothers, who spoke on condition of anonymity, said employees were briefed of the situation earlier Sunday afternoon via conference call. Lehman executives did not explicitly say the company was filing for bankruptcy protection, but essentially confirmed the bank was planning to liquidate its assets.

There were other signs that Lehman was moving closer to a bankruptcy filing, with several reports that it has hired Weil, Gotshal & Manges, the law firm that handled the collapse of investment firm Drexel Burnham Lambert in 1990.

Moreover, there was also an emergency trading session held at the International Swaps and Derivatives Association to "reduce risk associated with a potential Lehman Brothers Holdings Inc. bankruptcy." The ISDA, which arranges trades for derivatives, said it was allowing customers to make trades and unwind positions linked to Lehman — but that those trades would be voided if no filing occurred before midnight.

Paulson, Timothy Geithner, president of the New York Fed, and Securities and Exchange Commission Chairman Christopher Cox were among those taking part in the Lehman meetings. Federal Reserve Chairman Ben Bernanke is actively engaged in the deliberations but wasn't in attendance.

Paulson's tough bargaining stance received support from outside observers Sunday, who argued that the government had no choice but to draw a line in the sand.

"If Treasury put money into the Lehman deal, then going forward no deal would get done without Treasury help," said Mark Zandi, chief economist at Moody's Economy.com. "Every potential buyer would wait until Treasury stepped in and that would mean Treasury would be on the hook for a lot more bailouts."

The current situation is different from Bear Stearns' situation six months ago.

In Lehman's case, financial markets have been aware of the company's problems for a much longer period and have had time to prepare. Investment banks also now have the ability to obtain emergency loans directly from the Fed, a crucial support that they did not have back in March when Bear Stearns was rescued.

Bankers and government officials were also trying to tackle a broader agenda that includes problems at American International Group Inc. and Washington Mutual Inc., said the investment bank officials, who were briefed on the talks.

AIG, the world's largest insurer, and WaMu, the nation's biggest savings bank, have taken steep losses during the past year from risky investments. There were reports that AIG plans to disclose a restructuring by early Monday that's likely to include the disposal of major assets including its aircraft-leasing business and other holdings.

Lehman put itself on the block earlier last week. Bad bets on real-estate holdings — which have factored into bank failures and caused other financial companies to founder — have thrust the firm in peril. It has been dogged by growing doubts about whether other financial institutions would continue to do business with it.

Richard S. Fuld, Lehman's longtime CEO, pitched a plan to shareholders Wednesday that would spin off Lehman's soured real estate holdings into a separately traded company. He would then raise cash by selling a majority stake in the company's unit that manages money for people and institutions. That division includes asset manager Neuberger Berman.

______

AP Business Writers Stephen Bernard in New York and Raphael Satter in London contributed to this story.

 

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U.S. Marines Try to Retake Afghan Valley From Taliban PDF Print E-mail
Written by Admin
Wednesday, 01 July 2009
Published: July 1, 2009
 
PHOTO: US troops in Helmand Province, Afghanistan
U.S. Lt. Col. Christian Cabaniss speaks to his Marines at Camp Dwyer on July 1, 2009 in Helmand Province, Afghanistan.The Marines are part of a stepped up effort by American troops fighting Taliban fighters in Southern Afghanistan.
(Joe Raedle/Getty Images)
 

KABUL, Afghanistan — Almost 4,000 United States Marines, backed by helicopter gunships, pushed into the volatile Helmand River valley in southwestern Afghanistan early Thursday morning to try to take back the region from Taliban fighters whose control of poppy harvests and opium smuggling in Helmand provides major financing for the Afghan insurgency.

The Marine Expeditionary Brigade leading the operation represents a large number of the 21,000 additional troops that President Obama ordered to Afghanistan earlier this year amid rising violence and the Taliban’s increasing domination in much of the country. The operation is billed as the first major push in southern Afghanistan by the newly bolstered American force.

Helmand is one of the deadliest provinces in Afghanistan, where Taliban fighters have practiced a sleek, hit-and-run guerrilla warfare against the British forces who have been based there.

British troops in Helmand say they rarely get a clear shot at Taliban attackers, who ambush them with improvised explosive devices, rocket-propelled grenades and assault rifles. The explosive devices — some made with fertilizer distributed to Afghan farmers to wean them from opium production — are the most feared weapon. The Taliban favor ambushes in the morning and evening and do not often strike during the blazing afternoon heat.

In recent weeks some British troops have been setting up what are known as “blocking positions” on bridges over irrigation canals and at other locations, apparently to help stop the flow of insurgents during the main military operation and to establish greater security before the presidential election scheduled for August. The British forces, whose main base in Helmand is adjacent to the main Marine base, will continue to support the new operation.

The British have had too few troops to conduct full-scale counterinsurgency operations and have often relied on heavy aerial weapons, including bombs and helicopter gunships, to attack suspected fighters and their hide-outs. The strategy has alienated much of the population because of the potential for civilian deaths.

Now, the Marines say their new mission, dubbed Operation Khanjar, will include more troops and resources than ever before, as well as a commitment by the troops to live and patrol near population centers to ensure that residents are protected. More than 600 Afghan soldiers and police officers are also involved.

“What makes Operation Khanjar different from those that have occurred before is the massive size of the force introduced, the speed at which it will insert, and the fact that where we go we will stay, and where we stay, we will hold, build and work toward transition of all security responsibilities to Afghan forces,” the Marine commander in Helmand Province, Brig. Gen. Larry Nicholson, said in a statement released after the operation began.

The Marines will be pushing into areas where NATO and Afghan troops have not previously established a permanent presence. As part of the counterinsurgency strategy, the troops will meet with local leaders, help determine their needs and take a variety of actions to make towns and villages more secure, said Capt. Bill Pelletier, a spokesman for the Marines, according to The Associated Press.

“We do not want people of Helmand Province to see us as an enemy, we want to protect them from the enemy,” Captain Pelletier said, The A.P. reported.

The goal of the operation is to put pressure on the Taliban militants “and to show our commitment to the Afghan people that when we come in we are going to stay long enough to set up their own institutions,” he said.

The 21,000 additional American troops that Mr. Obama authorized after taking office in January almost precisely matches the original number of additional troops that President George W. Bush sent to Iraq two years ago. It will bring the overall American deployment in Afghanistan to about 60,000 troops. But Mr. Obama avoided calling it a surge and resisted sending the full reinforcements initially sought by military commanders.

Instead, Mr. Obama chose to re-evaluate troop levels at a series of specific moments over the next year, officials said. The Obama administration has said that the additional American commitment has three main strategies for denying havens for the Taliban and Al Qaeda: training Afghan security forces, supporting the weak central Afghan government in Kabul and securing the population.

In late March, Mr. Obama warned Congressional leaders that he would need more than the $50 billion in his budget for military operations and development efforts. Asked by lawmakers about the prospect of reconciliation with moderate members of the Taliban, officials said Mr. Obama replied that he wanted to sift out hard-core radicals from those who were fighting simply to earn money.

Eros Hoagland contributed reporting.

 

 

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