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 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
September 16th, 2008 at 9:28 am
I hope not. How can they deny the fact that AIG sent three of their best men to take the helm of Philamlife last year. These three men basically run the company with Mr. White Boy only having a honorary title. And come to think of it, for the past four years, the company has been bleeding. I’ll keep my fingers crossed.
September 16th, 2008 at 8:50 am
subprime + doctored ratings = lehman brothers, ML, AIG and many more.
and so the equation continues until both of these 2 US Presidential candidates offers some bold solution to the financial crises going on. unfortunately both are busy throwing pigs and lipstick at each other.
September 16th, 2008 at 8:13 am
Salve,
Hopefully your sources are correct. I have college plan for my son which is one payment short from being fully paid so what happens to AIG and Philam really concerns.
I am just a bit doubtful if these institutions are telling the whole truth. Remember, that these finance companies are the same companies that first denied that there is a credit crunch, then denied that their exposure is huge, then refused to writedown their investments until we get to this point.
September 16th, 2008 at 8:05 am
really sad news Salve,
2 of my friends are still working for Lehman brothers in Japan. I hope they’re fine.
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