Guardian UK: Wall Street's bloody Sunday

[marmar]

Wall Street's bloody Sunday
The crisis gripping the US financial markets shows no signs of ending after an unprecedented weekend of drama

Richard Adams
guardian.co.uk, Monday September 15 2008 07:36 BST



Has Wall Street ever seen a weekend like the one it has just been through? Perhaps, in the depths of the great depression - but nothing in recent memory, not even the collapse of the hedge fund LTCM 10 years ago, comes close to the drama and crisis that the US financial system is going through.

In case you haven't been paying attention, here's what's happening. Lehman Brothers, one of the largest and oldest US investment banks, is going bust, barring an unlikely last-minute government bailout. Merrill Lynch, for years one of the titans of Wall Street, hocked itself in a firesale to a rival, Bank of America. And AIG, one of the world's largest insurance firms, is begging for a $40bn emergency loan from the US government to stave off its own destruction. In the words of the Wall Street Journal: "The American financial system was shaken to its core".

And that was just on Sunday. It doesn't pay to take the weekend off on Wall Street these days – it was just last Sunday that the US Treasury confirmed it was taking control of Fannie Mae and Freddie Mac – the vast American mortgage agencies – at a cost to the taxpayer estimated to eventually range between zero dollars and a few hundred billion.

And as the minutes ticked over from Sunday to Monday on the US east coast, Lehman Brothers finally threw in its towel and filed for bankruptcy. In one way or another it will be the end for a bank that started in Alabama back in 1844 – a sticky end considering that last year it had sales of $57bn and only a few months ago was named by Business Week magazine in its 50 top performing companies for 2008. (Business Week's citation, in hindsight, looks wise: "Still, the firm is highly leveraged. The final throes of the global credit contraction will test just how good it really is." Now we know.) ........(more)

The complete piece is at: http://www.guardian.co.uk/commentisfree/cifamerica/2008/sep/15/useconomy.creditcrunch