NYT Major Breaking Issue--- Lehman Brothers and Merrill Lynch near collapse Wall Street in Real Fear

[grantcart]

It has been posted in other forums but for the GDP addicts no threads so far (apologies if I missed them0

Real fear of a collapse of the financial industry has erupted today - Sunday - as a number of potential sutors that were looking at buying Lehman have all fallen through. Merrill Lynch now under pressure.

Expect next week to have a heavy dose of proposals by the candidates on the issue.

NYT: Nation’s Financial Industry Gripped by Fear

http://www.nytimes.com/2008/09/15/business/15street.html?_r=1&ref=business&oref=slogin


Fear and greed are the stuff that Wall Street is made of. But inside the great banking houses, those high temples of capitalism, fear came to the fore this weekend.

As Lehman Brothers, one of oldest names on Wall Street, appeared to unravel on Sunday, anxiety over the bank’s fate — and over what might happen next — gripped the nation’s financial industry. By late afternoon, Merrill Lynch, under mounting pressure, entered into talks to sell itself to Bank of America.

Dinner parties were canceled. Weekend getaways were postponed. All of Wall Street, it seemed, was on high alert.

In skyscrapers across Manhattan, banking executives were holed up inside their headquarters, within cocoons of soft rugs and wood-paneled walls, desperately trying to assess their company’s exposure to the stricken Lehman. It was, by all accounts, a day unlike anything Wall Street had ever seen.

In the financial district, bond traders, anxious about how the markets would react on Monday, sought refuge in ultrasafe Treasury bills. Greenwich, Conn., that leafy realm of hedge fund millionaires and corporate chieftains, felt like a ghost town. Greenwich Avenue, which usually bustles on Sundays, was eerily quiet.

A year into the financial crisis, few dreamed that the situation would spiral down so far, so fast. Only a week ago, the Bush administration took control of Fannie Mae and Freddie Mac, the nation’s two largest mortgage finance companies. Then, before anyone could breathe a sigh of relief after that crisis, Lehman was on the brink.

As details of Lehman’s plight began to trickle out on Sunday, the worries deepened that big financial companies might topple like dominoes. Bank of America began discussions to buy Merrill Lynch, the nation’s largest brokerage and the next firm coming under pressure.

[Kurt_and_Hunter]

1. It looks like BOA did buy Merrill Lynch, so AIG is the next focal point

[grantcart]

3. wow that is fast breaking

[Kurt_and_Hunter]

Late indeed. 44 Billion. WSJ article >

http://online.wsj.com/article/SB122142278543033525.html?mod=special_coverage

[DeschutesRiver]

32. No kidding. When I left the computer this am, it was BOA+Barclays buying Lehmans

when I checked in briefly, Barclays had backed out. But BOA was still in.

Came back to see the BOA buying Merrill news and thought my eyes had gone wonky. I knew the talk was that Merrill would be moving shortly, but like this coming week or the next.

Man, you snooze, you lose in following this stuff.

[lligrd]

2. Idiots Supported Bush And Now They Fear Collapse

What a surprise.

[mzmolly]

7. "It's the 'Democrat' congresses fault."

:sarcasm:

[lligrd]

11. Don't Laugh, They Might Have A Point

Pelosi did refuse to set the table.

[mzmolly]

15. LOL

True.

[Waiting For Everyman]

20. Bullshit, it's Gramm's fault - and his crony Repubs.

It's their agenda all the way, and they're STILL pushing it. I'm getting real tired of the blame-shifting, and Dems accepting it.

Facts matter.

*Sorry mzmolly, I see the sarcasm now. But others say that seriously.

[mzmolly]

27. I'll edit with quotation marks.

Sorry for the confusion.

[Doremus]

42. Supported Bush? Hell, they installed him. n/t

[WinkyDink]

4. I guess they're re-thinking those billions in 2007 salaries and bonuses.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajI8xAslBPLc&refer=home

[OwnedByFerrets]

30. Surely you jest....

as long as they get theirs, nothing else matters.

[WinkyDink]

34. 'Tis pity 'tis true.

[eleny]

5. According to Bloomberg cable channel Bank of America bought Merrill Lynch

Edited: http://dealbreaker.com/2008/09/bank-of-america-reaches-deal-t.php
"Bank of America Reaches Deal To Buy Merrill Lynch
Posted by John Carney, Sep 14, 2008, 8:44pm"

[Name removed]

6. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Betty]

8. will the government eventually take over

EVERY financial firm? It seems like they're all failing. Typical repugs, profit is private and risk is socialized. We can't have national health care, but we can have national bailouts of PRIVATE corporations that acted criminally.

[AdHocSolver]

24. The best short description of American capitalism on this web site. n/t

[WinkyDink]

36. Bethlehem Steel was left to die.

[1corona4u]

39. Spot on.

[alcibiades_mystery]

9. Bank of America to buy $17 Merrill stock for $28/share

Something is very, very stinky.

[Oak2004]

52. I believe the term for this is

"ponzi scheme"

[Sanity Claws]

10. What does this mean for ordinary people who

have investment accounts with Merrill Lynch?
What about folks who have investment accounts with Lehman Bros.?
I really don't understand how this is going to shake out.

[crazylikafox]

17. Merrill accounts will be ok because they will just go to Bank of AM

I'm not sure how Lehman will work. There is a certain amount of insurance on security accounts. Lehman stock of course will go to 0, if they file bankrupcy tomorrow. If AIG goes under that's a real big problem, since they're an INSURANCE company. Don't know how that will work. Boy, this is a house of cards.

[Sanity Claws]

21. Who is the insurer of security accounts?

I know they are not FDIC. With your house of cards remark, are you implying that AIG and similar insurance companies are the insurers of security accounts?
:scared: (this is the first time I have used this smilie).

[crazylikafox]

26. I'm not sure. I'm not a professional, just a shaky investor. I need to do some research.

I have my retirement money with Wachovia and was very concerned last month, so I spoke with my advisor. Was told there was insurance. But the limit may be $500,000. One thing I do know is that if you have securities in your brokerage account and the broker goes bankrupt, you still own the securities as long as they were in your name.

If we have anyone on board who has more info, please jump in and correct me.

[nbsmom]

45. Even Greenspan allowed that he had never seen anything like this...

Although he said that he thought the chance of our economy going into a 'recession' was less than 50%. He also thought that it was a fine idea to allow short selling on the more troubled financial stocks...(what a braintrust he is!) I was nauseous for quite some time after viewing that (and Carly Fiorina's defense of McPalin) this a.m.

If Greenspan doesn't know how this plays out, I'd be curious as to who _does_ know what will/can happen next...

As far as 'insurance' goes, SIPC is a rough equivalent of FDIC insurance but mostly to protect against a single or small amount of broker/dealer malfeasance. (IOW,SIPC is not set up for global market meltdown.) But you are correct, the positions in a brokerage account continue to belong to you even if the broker/dealer itself goes bye-bye.

AIG is a completely different animal. The institutional investors -- fund and pension managers -- who own this stock are probably not going to bail even though it's trading at half its perceived value (yes, Ike probably hit its book hard, but they probably haven't forgotten how to reinsure and transfer a portion of their risk...AIG is a HUGE insurer after all, and that's kind of what they're supposed to know how to do.)

I think the key here is to not jump into or out of anything. Sit tight, breathe deeply, and remember that cash and liquidity can be powerful...but don't sell unless you absolutely HAVE to.

Hope that helps!

[abumbyanyothername]

28. Boy this is a house of cards

You have no idea. The whole economy is going to be radically and painfully restructured as IT ALL RESTS ON EVER EXPANDING CREDIT. Except now we are in a period of contracting credit.

I think it's good for the Dems however.

I am a bacterium who works in the bowels of finance and what I think is going on is that the world has frozen lending to the US until they throw the bums (no offense to bums) out. Since the US is running something in excess of a $60 Billion a MONTH current account deficit, this is going to hurt. BAD.

[nolabels]

56. It's kind of funny when the boys in the penthouses get scared

I was postulating a few years ago that something like this might happen eventually. I wouldn't bet on those parties at the other end all having totally wholesome intent though.
The bigger fish that eat the smaller fish are really just fulfilling their potential. Nothing moralistic or nihilist about it, it's just how business and life works :shrug:

[SheilaT]

40. Also, the investment accounts

are just that, investments in various things, usually the stocks of other companies or mutual funds or the like.

I have a M-L account and I'm not particularly concerned about this change. I need to be more concerned about the economy in general and what might happen to the value of my investments.

[Submariner]

12. I guess all these MBA's and Economics PhD's aren't worth the paper their degrees are printed on

Except to swindle their clients (us).

[GreenPartyVoter]

16. Our money's not worth the paper it's printed on, either. Good job, pointless-degrees-guys!

[harun]

37. Their whole education is to get them to ignore reality and make as much profit as possible

regardless of the consequences. The obvious conclusion to that is disaster. Only thing averting disaster is the gov't using tax payer money to nationalize corrupt institutions like Fannie Mae and Freddie Mac. More tax payer money will probably be used to bail out these other institutions because other companies won't touch them with a ten foot pole. They know it is a bad business decision to buy these companies. That they have no chance of paying off their debts.

[AdHocSolver]

41. I have been saying these MBA's and PhD's spout nothing but Bullsh*t for months now.

Their function is to obfuscate reality for the benefit of the corporate crooks, so that the suckers (investors) will pour their life savings into the Ponzi schemes known as the stock market.

The "real" economy, the buying and selling of goods and services, has been near collapse for months. Unemployment and underemployment have already reached near record levels. Almost every consumer good is manufactured in a foreign country creating a huge trade deficit that is already devaluing the dollar, which is now driving the record price increases we are experiencing.

The stock market hasn't collapsed yet because a Ponzi scheme will survive until nobody has the ability to keep buying the worthless paper. It is a game of musical chairs. As long as the music keeps playing, the illusion is maintained, and the fraud keeps chugging along.

However, one by one, the "musicians" (i.e., the financial institutions) are dropping out (because they all are experiencing unsustainable losses) and pretty soon there will be no players left. The music will stop, but all the chairs are gone.

The ONLY fix is to bring manufacturing back to the U.S. and provide people with jobs. This requires the government to remove NAFTA, the WTO, the IMF, and all other corporate-sponsored cartel agreements, and reorganize the Federal Reserve to make it accountable to the people. This requires changes in the tax laws to reward manufacturers who hire American workers and produce goods in the U.S. It requires imposing import quotas and import taxes to penalize those companies who import cheap foreign products.

Note: As the dollar is devalued, those once cheap foreign goods are going up in price. Since the companies pocketed the savings due to cheap labor anyway, the public is much better off buying products made locally, and having the money they spend stay in the U.S.

These policies will reduce our trade deficit, provide Americans with income, provide tax income to our governments so that they can support infrastructure, education, affordable health care for all citizens, research, environmental protection, and everything else a government is supposed to provide its citizens.

If you look for "answers" from the "experts" with the MBA's and the PhD's, then you are grabbing a toxic substance. The description I have presented here (and in other posts) is all you need to know to understand what is happening. You may want to check out "Ponzi scheme" on Wikipedia.org.

One more bit of information. Most of the assets of these companies is gone. The value was stolen a long time ago. Thinking about the losses is useless crying over spilled milk. Nothing will change unless we change the rules of the game. This requires reregulation of businesses to eliminate the thievery that has taken place. It means bringing manufacturing back to America as I outlined above. It means setting up a universal health care system, and divorcing health care from employment. We cannot turn back the clock, but unless we change the game, the crooks will remain in control, and this country will keep sliding downhill.

For those of you who only give credence to what people say who have degrees, I have a B.A. in economics.

[1corona4u]

43. AdHocSolver for Secretary of Commerce!!!

:-)

[YvonneCa]

51. What are your thoughts on...

...rebuilding the economy by creating green jobs and rebuilding infrastructure?

[AdHocSolver]

58. Such a policy will help, but we have to stem the huge debt created by offshoring jobs.

This debt is causing the value of the dollar to decline substantially, which is cause for a significant increase in inflation.

The corporations have subsidized this debt to foreigners by shutting factories, a source of wealth creation, and selling American assets to foreigners.

A hypothetical example of what this entails. Harry and Louise lose their jobs. They start living off of their savings which eventually becomes depleted. To cover expenses, they start selling their furniture, then their clothes, then one of their cars, and they still have so much debt, that they can never pay it off. This is the state of the U.S. today. This is the main reason that U.S. governments have no money. It isn't merely the tax cuts. If more Americans were working at good paying jobs, all governments would be collecting more taxes and be able to rebuild infrastructure, support education, and take care of the people's business. Both unwarranted tax cuts and loss of tax revenue due to loss of jobs have to be accounted for.

The corporate executives have driven this country into debt to enrich themselves, and now they are selling off America's assets at garage sale prices to prevent a total economic collapse that they themselves created.

We need to reregulate business and rewrite trade policy to prevent the kind of wholesale thievery that has brought us to this state. Jobs, both manufacturing and service jobs, have to be returned to the U.S. so that Americans who buy goods pay other Americans who make the goods. That prevents the outflow of money to foreign countries and prevents the build up of massive debt.

[YvonneCa]

59. Thank you for responding. I agree with all...

...you say. And, while I am not any sort of expert on economics (not even close :7 ) that is the reason I support what Al Gore is doing by trying to build a movement that will advocate for HUGE changes in our economic system...related to green jobs and infrastructure.

Have you seen wecansolveit.org ?

[AdHocSolver]

61. I visited wecansolveit.org. Good ideas, but their policies alone will NOT solve our problems.

Two reasons why green technology, while eminently worthwhile for the environment, will NOT solve our economic problems.

First, if everything else we buy is manufactured offshore, our unemployment will still be very high, and so will our trade deficit, our foreign debt, and our governmental deficits.

Second, if corporations aren't reregulated, and trade and tax laws are not rewritten to promote American manufacturing over imports, it will be a very short timeline before the corporations ship our "green" technology and our "green" jobs to Asia to increase their profits, just as they shipped every other American developed technology overseas.

Reregulation of the corporations and control of U.S. trade by the government for the benefit of all must be the first order of business or all other policies will fail.

Sorry for the reality check. But, no other actions or innovations will help the situation so long as the corporations have full control of the economy.

[Kdillard]

13. Unbelievable and we are a nation of whiners. I am glad that

Obama is doing Good Morning America tomorrow and will be discussing econmic issues on the show and throughout this week.

[Bubbha Jo]

14. This would be a good week for Obama to focus on this issue

This will worry a lot of citizens. They may not know much of the economy but they definately know that brand name of Merrill Lynch...

He needs to address solutions in simple terms that will someone shine that his knowledge of economics far above that of the opposing ticket.

[crazylikafox]

18. Yep, this is a big one.

I'm watching CNBC right now (10PM eastern) Somebody actually said that these problems were based in deregulation. It's about time.

[Bubbha Jo]

25. His message of "change" should ring clearer now.

[renate]

33. this is definitely the week for Obama to roll out an ad with McCain's statement

"I don't know much about the economy"

But they don't need me to say that, obviously... if there were ever an ad theme staring a campaign in the face, this would be it. And I think/hope the clip of McCain saying that will be devastating.

[Nikki Stone1]

19. The rich will get out with theirs intact; it's the rest of us who will suffer.

God DAMN these people!

[aint_no_life_nowhere]

22. Meanwhile, brain dead Republicans support a moose hunting beauty queen

and a cantankerous curmudgeon unschooled in economics to get us out of this financial mess.

"Ms. Palin. What is your solution to the breakdown of the financial markets in this country?"

"Uh, A-1 steak sauce is delicious on mooseburgers, Charlie."

[PolNewf]

23. Quit Doling Out That Bad-Economy Line

So says McCain economic advisor.

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/12/AR2008091202415.html?nav=hcmodule

[tabasco]

29. Booshie told the billionaires they were his base!!!

Those billionaires sure were smart putting MBA George AWOL Boosh in charge of the economy!!

[paparush]

31. BOA goes beyond its allowed liquidity reserve percentages to buy Merrill.

[lligrd]

54. I'm Wondering What They Are Thinking

They've taken on an awful lot of bad debt recently and had plenty of their own originally.

[Zynx]

35. This is far and away the biggest issue of the campaign.

I want to see McCain try to explain this one.

[Quixote1818]

38. It will look something like this

http://www.youtube.com/watch?v=iqKaU2fZkAc&feature=related

[Nikki Stone1]

44. So the globalists are finally destroying us.

We're in for some hard times.

[TexasObserver]

46. Merrill Lynch has agreed to a take over by Bank of America

http://www.nytimes.com/2008/09/15/business/15lehman.html?hp

[SCDem]

60. and I am glad I do not bank with Bank of America

for this reason and many others.

[Cha]

47. I guess you could call me

an addict..thanks for posting the inevitable news here, grant.

Quit a contrast with john mccain's lies.

[Barack_America]

48. So, do I invest in gold now or what?

Not that I have much money, but I'd like what I have to keep its value.

This is all so spooky.

[vaberella]

53. I'm investing in Gold. My only concern is that Gold can be supplied by banks that go bankrupt.

Invest in physical silver. It's safer.

[WinkyDink]

57. And then what? Buy bread with it? Or worthless dollars?

[AZBlue]

49. And these aren't small companies - that's the scariest part.

It would be scary if it were any companies, but these are two of the biggest names in the finanical industry!

[McCamy Taylor]

50. If they can not hold off these failures now, before the election, just think how bad the economy is.

This means by December we will be in the middle of the Second Great Depression for sure.

McCain will be Herbert Hoover. Do we need Herbert Hoover for the next great depression?

Hell no!

[lligrd]

55. Hold On To Your Hats Going To Be A Very Interesting Ride nt

[TheDonkey]

62. This is a REAL disaster. I have an MBA. I follow the markets. What is happening is INCREDIBLE.

Incredibly BAD that is. Greenspan is even parading around saying how this is the worst economic crisis he's lived through (I think he forgot to mention his hand in it). That man is at least 110!