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stinglikeabeeAt least, that's what Kai Ryssdal of NPR's Marketplace meant to say. Today Lehman Brothers filed for Chapter 11 bankruptcy, with debt of about $613 billion as of 31 May. There was intense speculation during the weekend whether the US Treasury would bail out the bank, similar to what had happened with Bear Stearns. Alas, this wasn't to be. Analysts saw this harsh stance by the Feds as 'drawing a line in the sand', and sending the signal taxpayers will not pay for the irresponsible decisions these banks make.
Problem is, what if Lehman Brothers collapsing is just a start of the dark times ahead? Already the repercussions of filing for protection has hit the Asian stock exchanges, the highest drop in the Hong Kong and South Korea markets at 6%. Asia has been somewhat slow to the slowing of the global economy as private equity deals are uncommon and banks not as keen as dipping into the US mortgage loans. However, with the markets it's more about the perception of things rather than the true economic picture. And let's face it, the news of a large prestigious investment bank failing does not sooth fears of a depression.
Horrified by the fate of Lehman Brothers, Merrill Lynch ran straight into the arms of Bank of America and into a 'shotgun wedding' as ABC's Nightline calls it. How desperate was Merrill Lynch? The deal was hastily cobbled together within two days. Most mergers and acquisitions (talks, discussions, shareholder meetings etc) are rarely shorter than a couple of months. Investors are also growing uneasy over AIG, the large insurance group that's scrambling to raise capital to prevent its own implosion. Failure of the insurance group would be devastating to the economy, as it also is a provider of fixed annuities ie retirement saving accounts. A lot of people, not just in the financial services, will lose their shirts if AIG fails. So far, the Feds have enlisted Morgan Stanley to help put together a rescue plan, though this is no guarantee.
And what about the thousands of workers without employment? Radio 4 interviewed several former Lehman Brothers employees at the City, many of whom packed up and left without being formally told of their job loss. One man shakily repeated how he had never envisioned something like this could happen, barely keeping it from crying. My boss at work even recounted the calls and e-mails he received in the morning from friends who work at Lehman Brothers. I thought of my former co-workers, three of whom are working for either Merrill Lynch or Lehman Brothers and the rest in a division expected to close and be outsourced to India.
Bush may insist the economy is sound all he wants, right now we're all holding our breaths and wondering how it can get any worse.
Problem is, what if Lehman Brothers collapsing is just a start of the dark times ahead? Already the repercussions of filing for protection has hit the Asian stock exchanges, the highest drop in the Hong Kong and South Korea markets at 6%. Asia has been somewhat slow to the slowing of the global economy as private equity deals are uncommon and banks not as keen as dipping into the US mortgage loans. However, with the markets it's more about the perception of things rather than the true economic picture. And let's face it, the news of a large prestigious investment bank failing does not sooth fears of a depression.
Horrified by the fate of Lehman Brothers, Merrill Lynch ran straight into the arms of Bank of America and into a 'shotgun wedding' as ABC's Nightline calls it. How desperate was Merrill Lynch? The deal was hastily cobbled together within two days. Most mergers and acquisitions (talks, discussions, shareholder meetings etc) are rarely shorter than a couple of months. Investors are also growing uneasy over AIG, the large insurance group that's scrambling to raise capital to prevent its own implosion. Failure of the insurance group would be devastating to the economy, as it also is a provider of fixed annuities ie retirement saving accounts. A lot of people, not just in the financial services, will lose their shirts if AIG fails. So far, the Feds have enlisted Morgan Stanley to help put together a rescue plan, though this is no guarantee.
And what about the thousands of workers without employment? Radio 4 interviewed several former Lehman Brothers employees at the City, many of whom packed up and left without being formally told of their job loss. One man shakily repeated how he had never envisioned something like this could happen, barely keeping it from crying. My boss at work even recounted the calls and e-mails he received in the morning from friends who work at Lehman Brothers. I thought of my former co-workers, three of whom are working for either Merrill Lynch or Lehman Brothers and the rest in a division expected to close and be outsourced to India.
Bush may insist the economy is sound all he wants, right now we're all holding our breaths and wondering how it can get any worse.
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Date: 2008-09-16 01:49 pm (UTC)He and McCain are clearly directing these messages towards one class of people and one class only.
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Date: 2008-09-18 02:47 am (UTC)http://www.guardian.co.uk/business/2008/sep/18/marketturmoil.hbosbusiness?gusrc=rss&feed=networkfront
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Date: 2008-09-18 04:58 am (UTC)If Obama can coalesce his economic vision, this will be a good chance as any to trounce McCain at the polls.
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Date: 2008-09-18 05:11 am (UTC)Oh, I've been hearing and seeing nothing but fury. Well, there's fear to. But most of commentary I've read seems to start with, "How in the sweet hot fuck...?!"
I was in London when that run on Northern Rock took place.
If Obama can coalesce his economic vision, this will be a good chance as any to trounce McCain at the polls.
Here's hoping.
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Date: 2008-09-18 05:27 am (UTC)And the commentary is mostly spot on. One I heard today places the blame squarely on the government for not regulating, another blames the greedy corporate culture of these firms. It's always better in hindsight, isn't it?
Now if the rumour is right and Wachovia is next on the chopping block, that's going to start a fire.