It's been a tumultuous, historic weekend on Wall Street. Lehman Brothers faces bankruptcy and Merrill Lynch agreed to be sold to Bank of America. Meanwhile, AIG is scrambling for cash.
Highlights:
"The American financial system was shaken to its core on Sunday." – Wall Street Journal
“My goodness. I’ve been in the business 35 years, and these are the
most extraordinary events I’ve ever seen,” said Peter G. Peterson,
co-founder of the private equity firm the Blackstone Group, who was
head of Lehman in the 1970s and a secretary of commerce in the Nixon
administration. – The New York Times
AIG needs $40 billion "Ratings agencies threatened to downgrade the insurance giant’s credit rating by Monday morning, allowing counterparties to withdraw capital from their contracts with the company. One person close to the firm said that if such an event occurred, A.I.G. may survive for only 48 hours to 72 hours." – NYTimes
The Federal Reserve is expected to extend lending facilities
"First there will be chaos and then an adjustment process as losses distribute themselves through the market,'' said Gilbert Schwartz, a former Federal Reserve attorney and now a partner at Schwartz & Ballen LLP in Washington. "There won't be any lasting turmoil. Treasury and the Fed have determined that markets have adjusted to the situation since Bear Stearns. If every time a big institution went bust the markets expected the government to step in, no one would ever adapt.'' – via Bloomberg
Graphic courtesy of the Wall Street Journal:
Coverage:
