Lehman Brothers, Merrill Lynch woes pile-up as Wall Street faces day of reckoning

The Telegraph ^ | 9/15/2008 | James Quinn, Wall Street Correspondent

[bruinbirdman]

Three of the biggest names on Wall Street - Lehman Brothers, Merrill Lynch and AIG - poised to buckle under the seismatic credit crunch pressure.

The global financial system faced its biggest test in at least half a century this morning after some of the world’s leading firms took drastic emergency action in America in the face of a worsening international economic crisis.

Lehman Brothers, one of the world’s biggest investment banks, was on the verge of collapse after a weekend of talks to find a willing buyer ended without success.

Hank Paulson, the US Treasury Secretary, led the efforts to identify a buyer but the British bank Barclays walked away from a deal. Lehman Brothers was last night being prepared for bankruptcy.

Merrill Lynch, another investment bank, appeared likely to be bought by Bank of America in an attempt to save it from a similar fate. Discussions on what would be a $200 billion (£110 billion) merger were at an advanced stage last night.

Meanwhile, American International Group, the world’s largest insurance company, was planning a radical restructuring of its business, which would see it sell its aircraft leasing arm and raise $20 billion from new investors.

The impact on stock markets was expected to be severe. If Lehman crumbled, it would be the first collapse of a major bank since the credit crisis began 13 months ago, and would stand as one of the biggest banking collapses in history.

Coupled with the moves by other Wall Street giants, it would wipe billions of pounds worth of value from pension funds and other investments.

Alan Greenspan, the former chairman of the US Federal Reserve and a leading economic expert, warned: “Let’s recognise that this is a once in a half-century, probably once in a century type of event.”

[oblomov]

Let’s face it: despite whatever moral justification there may be for bailing out Frannie, Bear, AIG, etc., the fact is that the US financial system has ceased to resemble a capitalist one.

[bruinbirdman]

Asian Stocks, U.S. Futures, Dollar Tumble on Lehman Bankruptcy

yitbos

[BGHater]

Asia right now.

Symbol	Name	Last Trade	Change	Related Info
^AORD	All Ordinaries	4,847.00 11:23PM ET	110.10 (2.22%)	Components, Chart, More
^SSEC	Shanghai Composite	2,079.67 Sep 12	0.69 (0.03%)	Chart, More
^HSI	Hang Seng	19,352.90 Sep 12	35.82 (0.18%)	Components, Chart, More
^BSESN	BSE 30	14,000.81 Sep 12	0.00 (0.00%)	Chart, More
^JKSE	Jakarta Composite	1,783.27 11:42PM ET	20.80 (1.15%)	Components, Chart, More
^KLSE	KLSE Composite	1,044.03 Sep 12	2.96 (0.28%)	Components, Chart, More
^N225	Nikkei 225	12,214.76 Sep 12	112.26 (0.93%)	Chart, More
^NZ50	NZSE 50	3,320.83 11:23PM ET	40.86 (1.22%)	Components, Chart, More
^STI	Straits Times	2,502.97 11:43PM ET	67.70 (2.63%)	Components, Chart, More
^KS11	Seoul Composite	1,477.92 Sep 12	34.68 (2.40%)	Components, Chart, More
^TWII	Taiwan Weighted	6,068.45 11:43PM ET	242.23 (3.84%)	Chart, More

[kms61]

not good for the home team. For one thing it will run all the positive Palin buzz right off the front pages. For another, all those social conservative issues that she helps with are off the radar again in a full blown economic crisis, and Obama’s “Change” mantra comes back to the forefront.

[cherry]

you don't have change when the Rat presidential candidate and dolt I might add has close connections with sleezy money brokers like Rezko and the vp candidate has family intimately in bed with the hedge funds...

throw in the fact that Fannie and Freddie gave lots of Rat money in the last year....

[RegulatorCountry]

Your Asia chart may be misleading. I understand that Nikkei is closed due to “Respect For The Aged” Day in Japan. And, Seoul is closed for their annual “Harvest Moon” festival.

[Carismar]

Not a schadenfreude thing, but McCain and the GOP will benefit due to more expertise in responsible national leadership.

[Freedom_Is_Not_Free]

A bad economy helps Obama. “It’s the Economy, Stupid!” II, the Sequel.

[BGHater]

Yeah, I didn't edit out the non trading indices for today.

[Freedom_Is_Not_Free]

[Freedom_Is_Not_Free]

Times like these are why I moved to all cash in late 2006. My sleep won’t be disturbed. It can’t feel to good to be in the market and wonder what is going to happen tomorrow...

[Freedom_Is_Not_Free]

A bad economy helps Obama. “It’s the Economy, Stupid!” II, the Sequel.

[politicket]

Has anyone heard if Lehman got their BK filing done by 11:59 p.m. EST?

If not, things are going to go from bad to worse since all of the credit swap and derivatives trades that were done during emergency session today will expire.

[jwalsh07]

Community Reinvestment Act+Cheap Money => Housing Bubble => Stupid Mortgage Instruments + Home Equity Loans to Borrow 50K to buy a stupid truck => No Savings => Sh_t Happens.

And it's happening now.

[ArmstedFragg]

So far, no word. I just checked Bloomberg and their latest was 5:30 pm.

[CatOwner]

I really love what this is doing to our retirement portfolio. Our early retirement in 4 years has already been pushed back two more years. At this rate, we'll probably be working until we die in our 80's or 90's. :(

[montag813]

Let them all fail. Let capitalism work. Bear Stearns never should have been “rescued” with corporate welfare for JP Morgan.

[dragnet2]

I really love what this is doing to our retirement portfolio. Our early retirement in 4 years has already been pushed back two more years. At this rate, we'll probably be working until we die in our 80's or 90's.

You won't be alone. No doubt they will have spent your meager social security money by then too. What a government.

[Chucky is a girlie man]

Markets in China, Hong Kong, Japan, and Korea are closed for a holiday today (Monday).

[NVDave]

Dunno if you saw this:

http://www.federalreserve.gov/newsevents/press/monetary/20080914a.htm

The Fed will now accept equities for their PDCF loans.

To my knowledge, the Fed has never taken equities as collateral for short-term loans.

The TSLF will now take all investment-grade debt securities - ie, corporate debt other than asset-backed paper is now eligible for lending of Treasuries.

What this signals, IMO, is that the Fed is no longer “the lender of last resort.”

The Fed is now the only lender in town.