This morning I heard on the TV news that New York’s Mayor Bloomberg cancelled a trip to California to deal with the Wall Street problem. When a Wall Street Mayor cancels a trip to deal with a Wall Street problem, something’s really wrong.
This morning the nation’s 4th largest investment bank Lehman Bros. is filing for bankruptcy. I thought I’d check in with The Economist my source for the capitalist, globalizer’s bottom line perspective. For them it’s all about the currency and the numbers and what they mean. From The Economist I could get a dispassionate assessment.
Here’s today’s headline:
NIGHTMARE ON WALL STREET
Here are some excerpts:
With these developments the crisis is entering a new and extremely dangerous phase.
Even if markets can be stabilised this week, the pain is far from over—and could yet spread. Worldwide credit-related losses by financial institutions now top $500 billion, of which only $350 billion of equity has been replenished. This $150 billion gap, leveraged 14.5 times (the average gearing for the industry), translates to a $2 trillion reduction in liquidity. Hence the severe shortage of credit and predictions of worse to come.
I’m no financial whiz, but I think this time the rats are being forced to bail out the water vs. jumping ship. The undercurrent is too strong for the best swimmers. Bank of America thew Merrill a lifewline whereas Lehman Bros. was basically “stood up” by potential buyers over the weekend.
Apparently US Treasury Bonds are selling. Investors are looking for security if there is such a thing. I bought travel insurance from AIG last month. They’re about to go under too. They were rated one of the best and is the largest US insurer by assets.
Every week, it’s something new. Where is this bottom below the blottom line? Because the free fall hasn’t been a day at the amusement park. The kitchen table econmist working from a check book who thought he/she already hit the bottom, the baby boomer who’s planning to retire in the next 1-5 years — may be sitting on a trap door.