Lehman Bros files for liquidation.
AIG announces restructuring
BOA in emergency takeover of Merrill Lynch
The storm's up to Cat3. It's going to get worse.
Remember: this all started because Fannie Mae tightened lending standards in 2006.
edit: Source thread on Metafilter, should have included this originally. Sorry!
Ok, not knowing a whole lot about the banking industry, could I get someone to explain what's going on?
Uncontrolled corporate greed spawned from virtually no regulation is my guess.
What's amazing is that we'll likely spend billions bailing these idiots out yet the C's will keep their houses in the Hampton's
Wow, it sounds like the Fed might actually let a bank fail. I'm not exactly sorry for Lehman after reading this article about their CEO's hubris and his 2007 $22 million bonus.
The most amazing news today (to me at least) is that Bank of America absorbed Merrill Lynch. At what point does a standard bank become no different from an investment bank? B of A is FDIC insured. It has to have tons of bad paper on its books after that. I smell a shotgun wedding.
The rabbit hole behind this thing would have even Alice crying out for help.
Seriously. Merril Lynch failing? I used to see commercials for those guys when I watched CNN in High School. I'm looking at a debt that will resonate for the rest of my life, and a really uncomfortable next couple of years. I guess the positive about this will be the chance that my folks will be able to afford a house soon.
I feel like someone's just hit the shiny RESET button on the economy. Jesus.
If you want an explanation of how this all started, check out this This American Life episode, called "The Giant Pool of Money." It explains what lending turned into (essentially a smorgasbord for whoever wanted it), and how and why it got that way.
A great primer for anyone you know who might not understand what is happening, too.
Uncontrolled corporate greed spawned from virtually no regulation is my guess.
What's amazing is that we'll likely spend billions bailing these idiots out yet the C's will keep their houses in the Hampton's :(
That was part of it. The other part was buyers not taking the time to understand their contracts beyond "free money." Not to "blame the victim" or anything... there's a lot of fault to go around in this one, is all.
Meanwhile all my pals @ Lehman are saying that they're being terminated without any packages -- Chapter 11 sees to that.
I was watching CNBC this morning while the anchors and insiders were talking about Lehman and job losses on Wall Street. One of the anchors was indignant that the government could sit by and watch as thousands of people lost their jobs, and the first thought I had was all the times I've heard people on CNBC gloss over the loss of American manufacturing jobs to foreign outsourcing with references to the reality of economic efficiency and overpaid American workers. Problem is that reality has finally leaked into our financial system.
I was watching CNBC this morning while the anchors and insiders were talking about Lehman and job losses on Wall Street. One of the anchors was indignant that the government could sit by and watch as thousands of people lost their jobs, and the first thought I had was all the times I've heard people on CNBC gloss over the loss of American manufacturing jobs to foreign outsourcing with references to the reality of economic efficiency and overpaid American workers. Problem is that reality has finally leaked into our financial system.
An anchor on CNBC probably doesn't know too many "little people" with manufacturing jobs. Taking out Wall Street however impacts his neighborhood and friends.
This is desperately needed. A lot of that imaginary money needs to go back to being imaginary. Sucks that I won't be moving for a long time or retiring ... well, ever.
I hate to sound like a communist but all this reminds me of Marx. Not the Stalinist hammer and sickle crap, the theory behind it all.
Marx said that the problem with Capitalism is that bigger companies can eat up smaller companies and grow even bigger, yet due to the way markets work, the history of a capitalist economy will be full of booms and busts. As Marx saw it, whenever there was a bust you'd get the hardier companies buying up the smaller ones until they got so big, no start-up could compete. Eventually, inevitably, there'd be a bust so big it would take out some of these behemoths and the result would be catastrophic. Enough to cause a revolution (and in comes Communism, because Marx also assumed the natural human response to losing everything is to get along).
Meanwhile all my pals @ Lehman are saying that they're being terminated without any packages -- Chapter 11 sees to that.
I bet the CEO won't have problems making ends meet.
I'm actually going to be the contrarian here and say that the lack of a government response to this is actually encouraging. This demonstrates a willingness to let the market do what it should here and cull the overexpansion of irrational exuberance.
Japan, faced with the same decision in the 1980's, bailed out the bloated kleptocrats and paid for it to the tune of 15 years of recession.
We'll take our lumps in the short term, but the markets will be healthier for it.
It's very important to remember that there are several very guilty parties at the core of the whole sub prime lending domino disaster we're looking at, and they should share the blame equally.
First, as people have mentioned (hi bear!), financial institutions deciding that they could lend anything to anyone and hide the riskiness of such behavior from investors and shareholders through some insanely complex trickle down bucket theories that even I, who work in finance, barely understand.
Second, people who think a 40,000 annual salary deserves a 350,000.00 home and three porsches in the garage. I don't wanna sound too cruel, but they deserve to have their mansion repossesed.
Third, lenders who sell this lifestyle to middle class people because they're just going to re package these terrible loans to third parties for a tidy profit.
Fourth, investors in major financial institutions who saw the writing on the wall in 2004 and decided to ride out fake profits for a few more years.
And finally, everyone who voted for George Bush, because it's his policies that are saving major institutions at the cost of taxpayers.
And now we're in the awesome position of being forced to have tax payers bail out financial institutions in order to maintain our basic infrastructure.
I'm actually going to be the contrarian here and say that the lack of a government response to this is actually encouraging. This demonstrates a willingness to let the market do what it should here and cull the overexpansion of irrational exuberance.
Did someone say... Irrational Exuberance!? (warning, very brief NSFW)
Malor, what's your take? You've said in response to my posts that regulation won't have an effect, yet here is regulation leading to just what you have advocated as necessary medicine, the failure of two large financial institutions and the refusal of the government to back them up. So why isn't this a hard rain washing the scum off the streets, to paraphrase ol' Joe Strummer?
My impression is that this is exactly what you'd want to see, and also support for my point - regulation could have prevented most of these problems, and is helping to fix them. Right?
In economics, stability is not necessarily your friend. Economic pain is like exercise; if we don't have any, we get fat and lazy.
Malor! Did we find something we 100% agree on??
*checks for sky falling*
McCain promises to clean up Wall Street. Meh. He's already shown himself to be putty in the hands of financial sharpies. His defense during the Keating scandal was essentially, "I can't be guilty because I was too stupid about financial to know what was going on."
McCain cleaning up Wall Street......that's pretty funny. I'm sure it would remind him of a story about cleaning up his cell as a PoW.
Maybe Sarah could do it. She balanced her checkbook once, she's got the experience.
This mess is what happens when you give the Presidency, Senate and Congress to the Republicans for 6 years. Bush basically gave them the keys and they proceeded to total the economy. His strategy of market based control is fundamentally flawed and the deregulation of these bajillionaires assholes has caused this nightmare. I'm increasingly convinced that pure capitalism might be worse than Communism. Pure capitalism creates giant eating machines and levels of personal greed that would make Gordon Gecko blush.
I guess they've successfully redefined "trickle down economics". Now these massive financial failures will trickle down to the wallets of every single taxpayer.
I can create a thread elsewhere if necessary, but I thought this thread might be an appropriate place to ask this question. I'm moving and have to find a new bank, but how I do I find out if the bank is on shaky ground?
Specifically, here are the banks in my neighborhood: Bank of America, Chase, WaMu, Fifth Third, and TCF. The last two have branches and ATMs in the area I currently live, which is the most convenient since I'll be back frequently to visit family.
With things as they are currently, I want to make a more informed choice about where I keep my money but don't know where to find that info.
Maybe Sarah could do it. She balanced her checkbook once, she's got the experience.
Funny, I misread "checkbook" as "cheekbone" for some reason.
Pick WaMu. They'll be taken over by the FDIC soon enough.
And as Malor correctly pointed out, B of A likely purchased Merrill Lynch in order to get themselves into "too big to fail" territory. So they'll be under the control of the feds soon as well.
BoA's a good choice. like DS said, WaMu's probably the shakiest of the big banks.
What state are you in? I'd pimp the bank I work for (we're a major competitor of 5/3) -- and we are the highest capitalized bank in the country thanks to a 7 billion dollar cash infusion, but I'm not sure if you're in our footprint.
Illinois. Moving to Chicago.
Specifically, here are the banks in my neighborhood: Bank of America, Chase, WaMu, Fifth Third, and TCF. The last two have branches and ATMs in the area I currently live, which is the most convenient since I'll be back frequently to visit family.
With things as they are currently, I want to make a more informed choice about where I keep my money but don't know where to find that info.
Find a local credit union. They have a totally different philosophy of business that is much more customer-oriented, and most of them aren't into the crazy stuff.
Malor, what's your take? You've said in response to my posts that regulation won't have an effect, yet here is regulation leading to just what you have advocated as necessary medicine, the failure of two large financial institutions and the refusal of the government to back them up. So why isn't this a hard rain washing the scum off the streets, to paraphrase ol' Joe Strummer?
My impression is that this is exactly what you'd want to see, and also support for my point - regulation could have prevented most of these problems, and is helping to fix them. Right?
I don't see any regulation going on here. What regulation are you speaking of?
McCain promises to clean up Wall Street. Meh. He's already shown himself to be putty in the hands of financial sharpies. His defense during the Keating scandal was essentially, "I can't be guilty because I was too stupid about finance to know what was going on."
What's interesting is watching Wall Street call for a fed cut by midweek. They aren't even being subtle about it. A trader was on CNBC this morning saying, "We're at 1200 in the S&P, and in the past that's about where the Fed has come in a cut rates. They can't delay." As though a lack of access to cheap borrowed money was the real problem with the system rather than a lack of knowledge about real values underlying balance sheets at the banks.
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