LEHMAN, MERRILL, & AIG: Party's Over

College Confidential Community
1

<p>Temperature on Wall Street and global financial markets has finally reached the highest boiling point since 1929. </p>

<p>Financial analysts now speak a universal language: Hold or Sell</p>

<p>NYC, London white-collar workers pack up. Go home. Party’s over.</p>

<p>Remaining financial institutions scramble to raise emergency funds.</p>

<p>The Fed and the warlocks of D.C. shy away. The blow is too overwhelming. </p>

<p>World Class insurer AIG asks for emergency funds while the world shivers. AIG issurance covers more than 100 million individuals and entities worldwide. </p>

<p>Wall Street giant Merrill Lynch snaps quick overnight acquisition deal by Bank of America, fearing that it could be the next victim of the Wall Street witch hunt.</p>

<p>Markets worldwide plunge. Shares lose value. </p>

<p>Alan Greenspan summarizes: “A once-in-a-century crisis.” And so, the Melt Down begins…</p>

<p>[BBC</a> NEWS | Business | Lehman Bros files for bankruptcy](<a href=“http://news.bbc.co.uk/2/hi/business/7615931.stm]BBC”>BBC NEWS | Business | Lehman Bros files for bankruptcy)</p>

<p>[BBC</a> NEWS | Business | Merrill Lynch sold in $50bn deal](<a href=“http://news.bbc.co.uk/2/hi/business/7616068.stm]BBC”>BBC NEWS | Business | Merrill Lynch sold in $50bn deal)</p>

<p>[FRB:</a> Press Release–Federal Reserve Board announces several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities–September 14, 2008](<a href=“http://www.federalreserve.gov/newsevents/press/monetary/20080914a.htm]FRB:”>Federal Reserve Board - Federal Reserve Board announces several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities)</p>

<p>[HBOS</a> plunge drives FTSE 100 to biggest fall since January - Telegraph](<a href=“http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/15/bcnhbos115.xml]HBOS”>http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/15/bcnhbos115.xml)</p>

<p>[Bailouts</a> Revisited - Council on Foreign Relations](<a href=“http://www.cfr.org/publication/17203/bailouts_revisited.html?breadcrumb=%2F]Bailouts”>http://www.cfr.org/publication/17203/bailouts_revisited.html?breadcrumb=%2F)</p>

<p>[Canadian</a>, U.S. stocks tumble as Wall Street stability fears deepen](<a href=“http://www.cbc.ca/money/story/2008/09/15/world-markets.html]Canadian”>http://www.cbc.ca/money/story/2008/09/15/world-markets.html)</p>

<p>[Lehman:</a> The morning after - Sep. 15, 2008](<a href=“Lehman: The morning after - Sep. 15, 2008”>Lehman: The morning after - Sep. 15, 2008)</p>

<p>[BBC</a> NEWS | UK | ‘It’s like a massive earthquake’](<a href=“http://news.bbc.co.uk/2/hi/uk_news/7616996.stm]BBC”>BBC NEWS | UK | 'It's like a massive earthquake')</p>

<p>[BBC</a> NEWS | Business | Central banks in cash injection](<a href=“http://news.bbc.co.uk/2/hi/business/7617166.stm]BBC”>BBC NEWS | Business | Central banks in cash injection)</p>

<p>[Bloomberg.com:</a> Exclusive](<a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg)</p>

<p>[Bloomberg.com:</a> Economy](<a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg)</p>

<p>[BBC</a> NEWS | Business | US markets join global share fall](<a href=“http://news.bbc.co.uk/2/hi/business/7615961.stm]BBC”>BBC NEWS | Business | Leading US stocks see sharp fall)</p>

<p>[FT.com</a> / Companies / US & Canada - Wall Street crisis hits stocks](<a href=“Wall Street crisis hits stocks”>Wall Street crisis hits stocks)</p>

<p>[Bloomberg.com:</a> Worldwide](<a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg)</p>

<p>…Meanwhile, global economic powerhouse China is also experiencing breaks on its recent economic miracle as a result of the credit crunch and global recession…</p>

<p>[Bloomberg.com:</a> Economy](<a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg)</p>

2

<p>

~ From a policeperson, as reported by Forbes</p>

<p>Can any of the economics people explain this ripple?</p>

3

<p>We should bring back a revised version of Glass-Steagall. The gov. can’t insure the bank’s money and then let them put it in the securities market. It’s practically begging them to make risky investments, if they pan out, great, if they don’t, their money is insured. Idealistically I would say just let the banks fail and the situation would resolve itself naturally, but I’m not sure the economy could take that kind of blow.</p>

4

<p>What type of explanation would you like geeknerd? the current credit crunch has been going on for over a year now, and there are a myriad of topics to cover. However, here’s a VERY short explanation of the chain of events starting in mid 2007:</p>

<ol>
<li>Housing prices fall >> 2. Homeowners’ wealth decreases >> 3. Subprime home mortgages default >> 4. Collateral Debt Obligations, meaning securities based on subprime assets decrease in value >> 5. Investment banks worldwide who own subprime securities see their value plunge, resulting in unprofitable investments >> 6. Banks with extra exposure to subprime securities, like Lehman and Bear, file for bankruptcy because the subprime assets they own lose value dramatically.</li>
</ol>

5

<p>I was just clueless about why the housing market was so significant. I found out.</p>

6

<p>and why do we have all these problems. Could it be over regulation and to much force on select sectors by govt.</p>

7

<p>^^^ Over regulation???</p>

<p>You are kidding right?</p>

8

<p>Definitely not over regulation. What we need is smart regulation, not more.</p>

<p>[New</a> Agency Proposed to Oversee Freddie Mac and Fannie Mae - New York Times](<a href=“http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print]New”>http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print)</p>

<p>5 years ago, The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.</p>

<p>Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.</p>

<p>The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.</p>

<p>The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.</p>

<p>”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”</p>

<p>So the ones in charge of oversight, the now obviously corrupt Dodd and Frank saw nothing wrong going on, but the Bush people saw this coming 5 years ago.</p>

<p>[IBDeditorials.com:</a> Editorials, Political Cartoons, and Polls from Investor’s Business Daily – The Real Culprits In This Meltdown](<a href=“http://ibdeditorial.com/IBDArticles.aspx?id=306370789279709]IBDeditorials.com:”>http://ibdeditorial.com/IBDArticles.aspx?id=306370789279709)</p>

<p>But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street’s most revered institutions.</p>

<p>…Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the ’90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.</p>

<p>And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.</p>

9

<p>Yes It was regulation and a fiat currency which landed us in a situation we are in now. To much support from government has allowed these executives to run wild. Why would executives and Fannie and Freddie do the right thing, when by government regulation, they could do whatever they want and if it went bad Ginnie was there to back them up. Why not Lie, cheap and steal, why not give out bad mortgages, they will still get paid when either the fed arranges a buyout or the treasury buys them out. They have no incentive to play fair. </p>

<p>But the regulation no matter how much of it, is what allows this. Believe me, if these executives came into work everyday and had no backing. Their paycheck was the work they did, we wouldn’t have big scandals and problems like we do now.</p>

<p>What the markets need is less regulation, businesses should be accountable for their actions in fear of the market not government Its a trick of government and the rich to fool the public into thinking we need evermore regulation. In fact more regulation makes everything more expensive and regulation is usually just a disguised form of cronyism to fool the non financially educated and make the rich richer.</p>

10

<p>Which is why it’s great that Paulson finally stood firm and said no more bailouts (lol)…</p>

11

<p>Th biggest have already fallen and they were helped by the government and even though Paulson says no more, he really has no choice. All you have to realize is, There is a reason wall street supports Obama. There’s a reason wall street has always supported candidates which love regulation. Free markets keep executives pockets light.</p>

12

<p>drhorse
REALLY! LOL. Over regulation? You can post any dam thing you want from any site you want and i’ll never buy that one. Also Wall street supports Obama. Where did you get that lie? Wall street always back the republicans. Always.</p>

13

<p>Did pug just favor regulation?</p>

<p><em>gasp</em></p>

<p>Dr. Horse is right. More regulation enabled these mortgage companies to go out and give out bad loans to men and women who would not pay them. This is something that has never, ever happened before. BAD GOVERNMENT.</p>

<p>If this was less regulated, the loaners would not be enabled to give out bad loans. Instead they would put aside their conservative mentality to not obtain the highest profit, but a modest one.</p>

<p>I GET IT NOW!</p>

14

<p>[Obama</a> Top Fundraiser on Wall Street - washingtonpost.com](<a href=“http://www.washingtonpost.com/wp-dyn/content/article/2007/04/17/AR2007041701688.html]Obama”>http://www.washingtonpost.com/wp-dyn/content/article/2007/04/17/AR2007041701688.html)
[Democrats</a> are darlings of Wall St. - Los Angeles Times](<a href=“http://articles.latimes.com/2008/mar/21/nation/na-wallstdems21]Democrats”>Democrats are darlings of Wall St.)
[OpenSecrets</a> | Fannie Mae and Freddie Mac Invest in Democrats - Capital Eye](<a href=“http://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni.html]OpenSecrets”>http://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni.html)</p>

<p>[Al</a> Hubbard and Noam Neusner - Where Was Sen. Dodd? - washingtonpost.com](<a href=“http://www.washingtonpost.com/wp-dyn/content/article/2008/09/11/AR2008091102841.html]Al”>http://www.washingtonpost.com/wp-dyn/content/article/2008/09/11/AR2008091102841.html)</p>

<p>artmommy, I laugh at your funny and panicky comment. Calm down. If you believe the sky is falling, perhaps you should vote Obama, as it seems he runs with that kind of sentiment also.</p>

<p>Smug, I laugh at your post. But good for you that you get it now :D</p>

15

<p>Is that necessarily a problem of liberal ideology or today’s government?</p>

16

<p>That’s part of your problem is that you subscribe to an ideology. As to today’s government, that is why a McCain presidency would be great. No “bad left”, “right only”, real answers and real reform.</p>

<p>[Bloomberg.com:</a> Politics](<a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg)</p>

<p>One can see the difference between postpartisan problem fixing as opposed to pinning McCain to Bush…for what, the 24389th time? McCain is not seeking to destroy the Democratic party (although I’m sure he’d love that too) and usher in some kind of Republican tyranny as it seems Obama wants to with the Democrats.</p>

<p>“Let’s have some straight talk,” McCain said in Vienna, Ohio. "Senator Obama is not interested in the politics of hope. He’s interested in his political future and that is why he is hurling in insults and making up facts about his record. Today he claimed that the congressional stimulus package was his idea. That’s news to those of us in Congress who supported it. Senator Obama didn’t even show up to vote.</p>

<p>"He talks a tough game on the financial crisis, but the facts tell a different story. Senator Obama took more money from Fannie Mae and Freddy Mac than anyone but the chairman of the committee they answer to. And he put Fannie Mae’s CEO, who helped create this problem in charge of finding his Vice President. That’s not change, that’s what’s broken in Washington.”</p>

<p>:D Go Mac go.</p>

17

<p>This is your quoted article.

</p>

<p>We haven’t finished the fund raising yet so your statements are not true yet. Wall Street has always given more money to the republicans than the Democratic Party. If Wall Street sees a benefit in it for them, they will give more money to the republicans as always. As the article states, Wall Street just thinks the Dems will win.</p>

18

<p>Hmm. I wonder why a man who is going to tax the rich is receiving money from them? Oh I know, because he’s going to create a stable economy that will make sure their dollar goes a longer way. Doey!</p>

<p>The mental disorder that is conservatism creates at atmosphere of definitional and by the text approaches and strategies, that completely fail once their greed is thrown into the mix upon implementation.</p>

<p>So why, in the past, have they started giving funds to the Democrats over the Republicans? My theory is that despite being taxed more, they took home more when the economy didn’t completely blow. And if its about having a friend in the white house, it doesn’t make much sense when more of their paycheck is “missing” every week. </p>

<p>And once again, even if he takes the money from their wives and what not, its fine with me. They’re trying to make a friend out of a man who has no intentions of going to their BBQs.</p>

19

<p>I’m not really familiar with where Wall St puts its money nor do I think it’s a significant issue.</p>

<p>I was just responding to this assertion</p>

<p>“drhorse
REALLY! LOL. Over regulation? You can post any dam thing you want from any site you want and i’ll never buy that one. Also Wall street supports Obama. Where did you get that lie? Wall street always back the republicans. Always.”</p>

<p>Which is categorically false.</p>

<p>The real issue is something that you refuse to address, smug.</p>

<p>5 years ago, The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.</p>

<p>The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.</p>

<p>”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”</p>

<p>Well, it’s not all Barney’s fault, but you certainly can’t accuse Bush of not trying to address this. It’s certainly not any easier with a Democratic congress (least popular ever), which is why the Fed has had to step up and do some big things.</p>

20

<p>[Fed</a> to give AIG $85 billion loan and take 80% stake - International Herald Tribune](<a href=“http://www.iht.com/articles/2008/09/17/business/17insure.php]Fed”>http://www.iht.com/articles/2008/09/17/business/17insure.php)</p>

<p>…</p>