Lehman Bidders Walk
by Bradley, Editor
September 14, 2008
Lehman Bros
Reports suggest that the final two bidders, Bank of American and Barclays, to acquire financial firm Lehman Brothers have dropped out of the running after the Federal Reserve declined to put up public money to hedge against acquisition losses. While details are still emerging, traders scrambled to sort out their positions with the bank in advance of the market opening on Monday. If anything should re-focus our election season upon the economy, this may be the catalyst. Economists have been predicting a larger shakeout in the wake of the moral hazard created by the Bear Sterns bailout. At issue here is the credit rating of US Treasury bonds themselves: with all of the guaranteed public money supporting Stearns, and now the Fanny sisters, the Feds may be hitting the wall on their limit to effectively borrow credibly. The silver lining may be that this is the beginning of the end, although it’s important to note that the next administration will have to try to unwind our national debt obligations just as they fight a two-fronted war.
This is not a good situation. Apparently Merill Lynch was sold to Bank of America for pretty cheap and AIG is claiming that they need $40 billion to cover their pensions.
Although the latest forecasts predict that growth this year will be about 2%, things are not looking all that good. Sure 2% growth isn’t a technical recession, but when most consumers are facing inflation near 6% and almost all of the growth is very concentrated, things are going to appear a lot worse than they are to the average citizen.
From Political Wire:
“My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen.”
– Former Nixon Commerce Secretary Peter G. Peterson, quoted by the New York Times, on the crisis in the financial markets.
In addition, Allistair Darling, the British Financial Minister recently claimed the situation was the worst in 60 years.
Of course, both of these are overstatements (especially Darling’s–Britain had freaking rations in the late 40s and early 70s), they are still not all that comforting.
[...] like this today probably was not the smartest move considering the Dow is down 600 points, Lehman Brothers declared bankruptcy, Merill Lynch was sold on the cheap to Back of America, and AIG is deep financial [...]
[...] has covered the recent financial crisis involving Lehman Brothers, Merill Lynch, AIG, and others. However, we want to make sure our readers have resources to better [...]