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When word surfaced in late May that Lehman Brothers Holdings Inc. was considering buying Conseco Inc.'s troubled lending unit, the possible acquisition was greeted with surprise. No other major investment bank had ever expressed interest in jumping into the dicey world of making loans to individuals who buy mobile homes.
Since then, Lehman's potential move has won fans on Wall Street. Investment bankers say the addition of Conseco Finance would boost business for Lehman's assetbacked securities underwriters, who already securitize many of the loans of the St. Paul-based lender.
At the proposed price of $750 million, Lehman would be picking up the financing unit at a fraction of the $6 billion that Conseco paid to acquire it just three years ago, when it was known as Green Tree Financial Corp.
"It's being viewed as a positive thing, because it looks like Lehman is getting a cheap price," says Clare Nickson-Havens, a financial services analyst at UBS Warburg. "Lehman has been long involved with Conseco Finance, so it knows what it is getting into and how to make a combination work."
Still, many question whether Lehman should be investing in a business so far afield from its traditional investment banking. The types of loans that Conseco Finance makes-to people who are sometimes less than creditworthy - are considered part of the controversial category of subprime lending.
That business, because of the recent failure of a number of lenders and an increase in government scrutiny, is...