By now you know that concerns about Freddieand Fannie dragged down stocks but perhaps no firm was more badly injured than Lehman.
That’s due in part to the large number of mortgages that Lehman underwrites, in much the same way as Freddie and Fannie. According to Bloomberg investors fear they’ll get left holding the bag “if those two go down and Lehman still owns a lot of those securities.”
Lehman Brothers, the nation's fourth-largest investment bank, is seen by many analysts to be the weakest of Wall Street's biggest firms. Concerns emerged about Lehman's liquidity and leverage last month after the investment bank reported an unexpected $3 billion loss for the second quarter.
“You can look at Lehman and think wow it’s really cheap but you don’t know that for sure. It’s just a tough time to step into financials,” says Sandler O'Neill analyst Jeff Harte on Fast Money.
The investment bank was also hurt by rumors that some of its biggest trading partners were scaling back their business. Several firms quickly denied the speculation, with bond fund Pacific Investment Management Co. and hedge fund SAC Capital Advisors LLC both issuing statements that they continue to do business with Lehman
There is at least one bright spot for the firm. Standard & Poor's said Friday that Lehman continues to earn its credit risk rating of “A” meaning the company can meet its financial obligations.