Lehman, AIG, Merrill: Is this December 1930?
September 15th, 2008Via: BBC:
I am writing this in Washington at 3.33 am GMT. There’s been a dramatic day on Wall Street and it’s not even open (actually they had to open trading this afternoon to clear the decks for tomorrow’s potential meltdown). Here’s what we know so far:
1. The US government has refused to put money into bailing out Lehman Brothers; Barclays Capital have pulled out of the rescue attempt, which has been orchestrated by the Treasury, the Fed and the SEC but so far failed. Lehman is set to file for bankruptcy as early as, er, around about now.
2. In a moment of contagion the massive insurer AIG, itself facing untold bad debts, is looking at selloffs or breakups, racing to save itself from collapse.
3. Bank of America just bought Merrill Lynch. For fifty billon dollars. Kersplat. Just like that.
I myself have been at the centre of the action all day: not in DC, not in Wall Street, but in the blighted inner city of Detroit. Here there are foreclosed properties, torched properties – ranging from 30k in value to 600k – and the 600k ones look like art deco mansions that would go for several million in London. This is the real epicentre of the earthquake that has just hit Wall Street: the bad lending on a massive scale that forced debt down the throats of low income people like foie down the throat of a gras.
Now, instead of writing off, oh, just a few billion here or there two major companies have had to write themselves off in their entirety. Lehman will go bust, effectively; Merrill is selling itself at half its value; AIG’s predicament is right now too opaque to predict.
