Chapter 203： Stormy News Corp

At this business gathering, Chen William met a lot of bigwigs. Of course, now he is one of the bigwigs in the eyes of others.

The next day, he set off for New York. Because the night before, he got the same news from different sources—

On February 15, Lehman Brothers applied to the Federal Reserve to become a bank holding company to obtain the Federal Reserve's financial asylum, but was rejected.

The reason for the rejection of Lehman Brothers’ application for help this time is also very simple, because the US Treasury Department and the Federal Reserve’s previous financial assistance to companies such as Bear Stud, Citibank, and the Two Room Company has caused dissatisfaction among the people.

During the acquisition of Bear Stearns by Morgan Stanley, the U.S. Treasury Department provided more than $30 billion in financial support, and injected a total of $45 billion into Citibank in two installments. As for Freddie Mac and Freddie Mac, the government continued to provide They received a lot of policy support, injected funds, and finally decided to nationalize these two companies to cover the losses they caused.

These policies aroused strong criticism from members of Congress and caused great opposition from the public.

They believe that these bailout funds are all from the taxation of all citizens, and that these companies currently in crisis are all responsible for themselves.

Due to their own greed causing the status quo, and even in this situation, the executives of many companies are still holding huge dividends and generous rewards, and they should not be rescued with the funds of the entire population.

Moreover, after having injected so much capital to bail out certain companies, the American government gradually discovered that, judging from the current actual situation, Lehman Brothers is by no means the last financial institution that needs bailouts.

If it is shot again, it is very likely that the US government's finances will also be dragged into the water. If it wants to prevent the further expansion of the financial crisis and save the financial enterprises that are already in trouble, the government has to consider the road to marketization.

Therefore, after the request for help was rejected, the next day, Lehman Brothers, facing a desperate situation, started negotiations with the South Korean Development Bank again, hoping to introduce a strategic shareholder, but it is said that the negotiations did not go well.

After returning to New York, William Chen immediately arrived at the Trump headquarters building. In his office, I met John Paulson, and the two needed to discuss the follow-up operations for shorting the stock market.

Among the major investment banks in the United States, William Chen's funds have four main short-selling targets, namely Bear Stearns, Citigroup, Merrill Lynch and Lehman Brothers.

Among them, Bear Stearns, before they were acquired, had already closed all the corresponding short contracts.

Citibank's recent share price has also fallen by more than 98% from their previous high price. At the lowest point, Citibank's share price even fell below $1, becoming a penny stock, so at that time, they All short positions of Citibank have been closed.

Now among these four investment banks, only Merrill Lynch and Lehman Brothers are left with short contracts. Now Merrill Lynch's share price has fallen by more than 95%, and Lehman Brothers has fallen by more than 99%. If no more financing can be found Funds, then only bankruptcy all the way.

Therefore, John Paulson advocates taking advantage of the current opportunity to close the short positions of these two stocks. Otherwise, if things change again and they succeed in saving themselves, there will inevitably be a rebound, which will reduce the current profit a lot.

Although Chen William knew that in his previous life, Lehman Brothers eventually went bankrupt, and Merrill Lynch ended up being acquired.

But now the world has undergone many changes, so at this critical time, he does not dare to operate according to the memory of his previous life, so the best choice is to be safe. At present, there is a very high profit, and there is no need to do so. Take too much risk.

After pondering, he still made a choice and began to liquidate all short positions on Merrill Lynch and Lehman Brothers stocks.

After receiving confirmation from William Chen, John Paulson began to prepare for the operation.

Three days later, they were informed that South Korea Development Bank withdrew from the acquisition after Lehman Brothers believed that the South Korean Development Bank's bid was too low, and South Korea's financial regulator criticized the acquisition.

The withdrawal of the South Korean Development Bank was a huge blow to Lehman Brothers, and the stock price fell by nearly 50% that day.

And John Paulson also took the opportunity to complete the liquidation of the short positions on Merrill Lynch and Lehman Brothers stocks.

The biggest part of these short contracts came from the $1.6 billion invested by William Chen at that time, and he shorted four investment banks respectively.

The $1.6 billion came from the agreement reached between William Chen and Goldman Sachs on the latter's repurchase of Goldman Sachs CDS bonds held by Meta Investment Company.

Goldman Sachs paid $600 million to buy back those CDS bonds with total premiums of $1 billion, while lending Meta Investments $1 billion in low-interest loans.

When all the positions were closed, the $1.6 billion had turned into more than $8 billion. After the unprecedented plunge in the stock prices of the four investment banks during this period, the $1.6 billion that William Chen used to short sell more than 4 times. profit.

At the same time, the short contracts of these investment banks in the No. 2 Fund and No. 3 Fund of Meta Investment Company have also been closed. According to John Paulson's estimation, this part of the short contracts also earned more than 5 billion US dollars. The money continued to be invested in shorting other stocks as well.

The impact of the subprime mortgage crisis on the economy is gradually spreading, so taking their short selling this time as an example, the real estate industry and the financial industry related to subprime mortgages are the first to be destroyed.

Then, because the financial industry was hit, resulting in a lack of liquidity, more industries were involved, which ultimately manifested in the stock market, that is, the relay of various sectors fell, affecting each other, and finally a vicious circle.

Therefore, as long as we grasp the rhythm of the spread of the subprime mortgage crisis, it is completely possible to invest in other sectors to continue shorting after the real estate and financial-related stock short contracts are closed, and such a round of harvest.

Now there are more than 8 billion dollars in the account of Meta Investment Company, of which 1 billion is a low-interest loan from Goldman Sachs, but although he has money now, William Chen is not in a hurry to repay this part of the loan.

Because we had already negotiated with the other party at that time, the interest on this part of the loan was extremely low. Since this is the case, then there is no need to rush to return it. Anyway, it is only a short time later. Wouldn't it be better to use it first.

……

On February 17, Sean Hall, a reporter who first exposed the wiretapping of News Corp's British newspapers, died at his home.

Although the police claimed that his death was normal and that the death was not accidental, there were still many rumors about conspiracy theories from the media and the public, all of which pointed to the unfavorable investigation of the matter by the British government and News Corp. Rampant attitude of questioning.

Under the pressure of the British royal family, opposition parties and public opinion On March 18, the British Prime Minister announced that an independent investigation committee would be established to investigate a series of wiretapping scandals in popular newspapers.

On February 19, former News Corp editor Neil Voss was arrested on suspicion of wiretapping, the ninth person to be arrested in the incident.

On the same day, Murdoch made the decision to close the 166-year-old newspaper after publishing its final issue the next day.

And he eventually relinquished his protection of former editor Rebecca Brooks, accepting her resignation as chief executive of the International News Corporation, the British newspaper owned by News Corp.

Hours later, Les Hinton resigned as chief executive of News Corp.'s Dow Jones Company, who was chairman of News International at the time of the phone-hacking incident.

The news report that William Chen saw reads:

"Media tycoon Murdoch and his son James attended a British parliamentary hearing on the 19th and were questioned about the wiretapping scandal. James apologized to the victims. Murdoch said: This is the most humble day of my life."

"He himself will not be ultimately responsible for the wiretapping incident, but will hold his subordinates accountable and deny that his reporters wiretapped the victims of the 9-11 incident. There was also an accidental episode during the hearing. A man threw a tray containing shaving cream. To Murdoch, Murdoch's glasses seemed to be knocked off, and Wendi Deng responded quickly, blocking the attacker with a volleyball-like smash."

"The scandal has plummeted Murdoch's News Corp, chased him away from his grand plans to buy a lucrative satellite TV business, destroyed his political clout in the UK and may have made him a global media presence. The empire is in turmoil."