NY Times: Wall St. Goliath Teeters Amid Fear of Wider Crisis

[marmar]

Wall St. Goliath Teeters Amid Fear of Wider Crisis

By VIKAS BAJAJ
Published: September 13, 2008

Fearing that Lehman Brothers is only days away from collapse, government officials and senior Wall Street executives met on Saturday to try to arrest a downward spiral that might imperil other financial institutions.

For a second day, the group convened at the Federal Reserve Bank of New York in Lower Manhattan, but the situation remained fluid, and the talks were set to resume on Sunday morning .

Adding urgency to the meeting were growing concerns that other big financial institutions like the insurance giant American International Group and the nation’s largest brokerage firm, Merrill Lynch, might face a similar crisis and also need billions of dollars in capital to strengthen their businesses. The group discussed the financial condition of other firms beyond Lehman and the overall state of the markets.

The spreading troubles were the latest sign that even the government’s extraordinary interventions into private enterprise during the last year have not been enough to halt the unraveling of storied companies that were widely viewed as unassailable until recently.

In fact, Lehman and other companies have said for months that they had a handle on their troubled assets tied to real estate. But their share prices have continued to sink. As a result, many investors are no longer sure what these financial companies are worth, and they do not want to invest in them until they do. At the same time, many hedge fund managers and other traders have profited handsomely from bets that these stocks would fall in value. ......(more)

The complete piece is at: http://www.nytimes.com/2008/09/14/business/14spiral.html?_r=1&hp&oref=slogin

[Orrex]

1. Gosh! There's only one thing to do!

Give them a huge, taxpayer-funded bailout with no strings attached, no accountability, no demands of future transparency, and no requirement that future business practices be changed.

Anything less would be anarchy!!!!!!!!!!!!!!!!!!!!!!!1!!!!!!!!!!!

[barbtries]

14. yeah and make sure their CEO's

get nice fat bonuses for their failures!

i am so SICK of this.

[dogindia]

15. Phil Gramm...Phill Gramm...connection to McCain...see post No. 2. Very Important

[mrJJ]

2. The GOP Scewed America

The GOP Scewed America

Gramm-Leach-Bliley Financial Services Modernization Act.

53 Republican Senators plus one Democrat - AYE

44 Democrats no Republicans - NAY

The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.

The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services. Other major mergers in the financial sector had already taken place such as the Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation combination in the mid-1990s. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Acts by combining insurance and securities companies, if not for a temporary waiver process <1>. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.
...
Economist Robert Kuttner has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.<6> Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly".

100's of Banks WILL FAIL. The FDIC DOES NOT have enough funds to cover the insured losses for the depositor's accounts. The FDIC will just got to the FED and get the money. Of course those funds will not be carried on the books... The taxpayer gets screwed again

"John McCain voted FOR the bank laws that led to the current credit crisis. John Mccain's economic advisor WROTE the law. 53 Republicans voted YES to the law. When you're in danger of losing your house, can you take a chance on more of the same from those who wrecked out economy?"

[crazylikafox]

8. Good summary. Thanks

[KharmaTrain]

3. Helicopter Ben Will Cave...If He Hasn't Already

Watch this regime get out the magic wand and let Lehman wipe away all those bad debts (into our pockets instead) and then let them get sucked up by Chase or JP Morgan...the assets that are worth it are canibalized to save the other two and the government gets stuck with the remainder.

As usual, those with 401ks and pensions will be hit the hardest...many that loaded up on real estate and mortgage stocks and have seen their values hit the skids for the past year. Honestly, things have gotten so bad and there's no end in sight, I dare not predict what's next...just feel we're not at bottom.

Here's hoping enough voters realize how this collapse is what years of repugnican "deregulation" and "free markets" brought...and they vote with their pocketbooks.

Cheers...

[Orrex]

4. Surely you've heard the mantra

"There's nothing wrong with deregulation that further deregulation won't fix."

Worship of the free market truly is a mental illness, and a serious one with consequences far beyond the idiot who buys into the promise of a deregulated world.

As far as I'm able to determine, no largescale program of deregulation has ever measurably helped a majority of people, though many well-placed opportunists have profited handsomely, of course.

[meow mix]

5. wamu gonna have to call up some credit..

ut oh

[marmar]

12. WaMu, Lehman and AIG might not make it thru the week.....

n/t

[Ikonoklast]

17. The looting is going on as we speak

The principals are stealing just as much as they can, as quickly as they can, knowing that they are going to fail anyway and then throw the husks on the steps of the Treasury.

We are witnessing the collapse of the banking system in this country, and the Fed, besides completely monetizing the losses and destroying the currency, is powerless to stop it.

Either way, we are very close to an economic disaster.

[EV_Ares]

6. Yeah these same people that are crying the blues and "help us" - "help us" are always

saying but if you elect the dems there will be government interference and regulation, we can't have that, we have to let the markets run their course, free markets only. However, if you notice from all these failures because of their incompetent ways where they screw everything up because they have raped everyone with the CEO salaries and bonus along with their corruption, who do they go crying to.

[Hubert Flottz]

11. The same type people who raise your payment 25% if you're a

day late...

[Abugface]

7. The free market works . . .

except when it doesn't. But if the failure is big enough the Republicans will bail them out and say "it's too big to fail".

Sure wish I was "too big to fail".

[EV_Ares]

9. Hey man that is the way to go. Remember back some years ago during the real estate

crash in NY and Donald Trump was basically bankrupt but because he had so much debt, the banks he had all those loans from didn't want to let him go down, so kept him afloat. Go out there and get enough debt and you are ok.

[Hubert Flottz]

10. What they need is...

A good "Purple Heart Band-Aid"

Do you know any American citizens on the verge of financial collapse? Has the GOP tried to help them?

[formercia]

13. Life imitates art.

[dogindia]

16. kkkkkkkk and rrrrrrrrrr

This is big guys. This is bigger than hollywood moose killer. Big Big all of of world wide economy.

Big///most important issue. Right wing selling out of American and world. Gramm. Gramm


IT IS THE ECONOMY STUPID.

IT IS NOT LIPSTICK.

[Jennicut]

18. I am very worried. How bad could the stock market get?

If no one buys out Lehman it does not look good.