Lehman's CEO Richard Fuld was forced yesterday to reassure shareholders when he said steps taken by the Federal Reserve to support brokerages eliminated the danger of a liquidity crisis. Bear Stearns ran out of cash as clients withdrew funds, forcing CEO Alan Schwartz to sell the fifth-largest U.S. securities firm to JPMorgan Chase & Co. for $2 a share, 90 percent less than the market value two days earlier.
"The game here is confidence,'' said James Hardesty, president of Baltimore-based Hardesty Capital Management LLC, which oversees $700 million for clients. "The profit figures depend on how illiquid assets are marked to market, and investors don't trust those numbers.''
Earnings were depressed by a $1.8 billion write-down caused by the slump in the mortgage market. The reduction in asset valuation pushed fixed-income revenue 88 percent lower, to $262 million. Other business grew. Equities revenue rose 6 percent to $1.4 billion. Merger advisory fees climbed 34 percent to $330 million and investment-management revenue jumped 39 percent to $968 million.