Problems with the [Lehman's] accounts were more serious than initially believed

AFP reports:

SEOUL (AFP) — South Korean banks led by Korea Development Bank (KDB) have shelved plans to buy a stake and management rights in Lehman Brothers due to concerns about its financial health, a report said Friday.

The state-run KDB and other banks were in talks with the major US investment bank until early August but negotiations failed at the final stage, the Chosun Ilbo newspaper said.

It said Lehman executives visited Seoul in June and initially sounded out the Korea Investment Corp. (KIC), a sovereign wealth fund which had earlier invested two billion dollars in Merrill Lynch.

After KIC decided not to proceed, the paper said, Lehman approached KDB chief Min Euoo-Sung, who had headed Lehman's local branch for three years until early this year.

Min initially pushed for the deal in cooperation with other local banks but backed out because the proposed takeover price was 50 percent higher than Lehman's book value, the daily said.

Problems with the accounts were more serious than initially believed, an unidentified government official was quoted as saying. "We concluded that it was too risky for KDB to take the deal."

Karl Denninger wrote about how the media have manipulated the markets on Friday, leading to another huge and useless rally.