Wall Street giant Lehman Brothers has fallen, Merrill Lynch has sunk into the arms of Bank of America and traders smell blood from global insurer AIG. Who’s next?
The New York Times has called this one of the most dramatic days in Wall Street’s history. The whole thing brings ominous tidings, says Fortune magazine. Expect more dramatic articles in the coming days as the media is whipped up into a writing frenzy.
Lehman employs around 3,000 staff in Asia and everyone must be on pins and needles waiting to find out what will happen to them. On the local front, only AIG among the big names mentioned in the news today, has a big consumer base in the Philippines, Philamlife being a member-organization of the insurer. (UPDATE: My local source says Philamlife has its own financial resources and will not be affected much by AIG’s troubles. I am waiting for an official statement from the company.)
But its no wonder gold prices are again on the rise (people tend to flock to gold whenever they are scared). This level of fear has gotten 10 big banks to come together and create a $70-billion fund to protect financial institutions from fallout coming from Lehman’s collapse.
The mechanics for this fund is not yet clear (for example, AIG is asking the Federal Reserve for a $40-billion lifeline to survive. Can it access the fund if the Fed demurs?). As it is, market watchers are concerned that bailing out companies in trouble may give financial markets temporary uppers, but it doesn’t mean the costs will not show up somewhere else. The US taxpayer’s bill, for instance.
All in all, this is a recipe for sleepless nights. Get ready for financial ramifications as this time, Wall Street’s troubles could really end up, in a big way, on our shores.
September 17th, 2008 at 8:55 am
Here’s How Did Lehman Failed.
September 17th, 2008 at 5:00 am
[...] but not the least, I invite you to read Salve Duplito’s blog Money Smarts to be in tune with financial issues going on in the [...]
September 16th, 2008 at 7:26 pm
the real troubling fact is not that Lehman had collapsed or that AIG is on the brink. the real trouble will start to emerge when the creditors start to assess the carnage and what these will cost them.
remember that Lehman is an investment bank, and that at the time of collapse, it’s debt stood at more than $600 BILLION. now, this means quite a few of global banks are looking at their combined $600 billion as possibly going down the drain.
the fallout from AIG should it collapse will be even worse, since it is the world’s largest insurance. insurance companies are such that they guarantee assets far larger than what they have themselves, and so when they collapse, or even have their credibility questioned, the assets that they back are also affected.
we are all in a serious situation, and there is no place for sugar-coating here. let us not get crippled by fear, but let’s also not hide under a rock and hope everything will be the same when we emerge.
September 16th, 2008 at 1:25 pm
my 2 cents…… looking at the troubled banks….. the most stable looking right now i think goes to citibank…. why?
they were 1st to writedown huge debt, middle eastern money bailed them out by infusing funds…… others … no idea….
i think the most liquid region right now is the middle east…… citibank backed up by middle eastern funds….. relatively safe bet…..
September 16th, 2008 at 11:16 am
From what I know with Philamlife: they’re safe from the AIG mess and you could thank the Insurance Commission’s tight investment rules for that. Still, you can write IC to be doubly sure: http://www.insurance.gov.ph