A Large Flock of Turkeys This Year

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By Allan Sloan
Tuesday, November 25, 2008

It's almost Thanksgiving, so what better time to discuss turkeys? Of the business variety, of course. You know, the kind of foul-up that makes you say, "That's a real turkey." Normally the problem is finding enough turkeys to list. This year there are so many that we can't begin to stuff them into a single article. So here's our 2008 flock.

· Lehman Brothers croaks. Letting Lehman Brothers go into bankruptcy in September is the turkey of the year, if not the decade, for the Federal Reserve and the Treasury Department. Lehman's failure set off a round of market freeze-ups and panics that we're still coping with. Among other things, it led to the Reserve Primary money market fund breaking the buck, which threatened a retail panic that forced the Fed and Treasury to intervene.

Plenty of people have been wrong about Lehman -- including Lehman itself, which this year spent $761 million buying its own stock at an average price of $49.60. Recent price: 4 cents.

After letting Bear Stearns implode in March, the Fed seemed determined to protect Lehman. Players who thought the firm was safe ranged from Lehman chief executive Dick Fuld (who during the endgame kept holding out for better terms to raise capital that never came) to my employer, Time Inc. (which has taken a $30 million loss on 12 floors in the Time & Life Building it sublet to Lehman in 2007), to yours truly (who wrote in June that "Lehman won't fail"). Oh, well.

· Yahoo spurns Microsoft. In a classic case of cluelessness, Yahoo rejected a $31-a-share offer from Microsoft, which had bid 60 percent above the market price because it was hot to add Yahoo's online heft to better duke it out with Google. Then, when Microsoft offered $33, Yahoo held out for $35. Microsoft walked, and Yahoo did a deal with Google that fell apart. Now Yahoo is selling at about $10 a share.

Co-founder Jerry Yang, who's had enough grace to quit as chief executive, is asking Microsoft to come back to the table. Good luck, Jerry. Honorable mention: Carl Icahn, who bought into Yahoo on the assumption that he could get a deal done with Microsoft. By our estimate, he's down more than $1 billion on his $1.8 billion Yahoo investment.

· Treasury flip-flop. Last fall Treasury Secretary Hank Paulson announced a superfund in which banks would combine to buy securities from "structured investment vehicles" they had left off their balance sheets. Amid a lack of interest, the superfund was canceled. Next came the $700 billion Troubled Asset Relief Program, which has now decided not to buy troubled assets. Hello?

Spiking the superfund and not buying troubled assets seem like the right things to do. They're on the turkey list because the government insisted it needed them to save the world, then walked away. That undermines public confidence, the most important asset the government has.

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© 2008 The Washington Post Company

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