15 September 2008
Lehman ruined, Merrill swallowed: the crisis at its height on Wall Street
The headquarters of Lehman Brothers in New York, September 14, 2008
With bankrupt Lehman Brothers, Merrill Lynch swallowed by Bank of America and the Federal Reserve to the rescue of the banking sector, finance is more American than ever mired in the crisis, the dominos falling one after the other.
The placement of Lehman Brothers under the protection of the Bankruptcy Act (Chapter 11), and formalized Monday, has plunged the financial world who do not, however, gave a panic.
Major European stock markets have dropped sharply Monday after the announcement of investment under the bankruptcy of the U.S. investment bank Lehman Brothers.
The Frankfurt Stock Exchange appears the closing bell, down 2.74%, that of London by 3.92% and 3.78% of Paris.
Towards 17h45 GMT, Wall Street, however limited its losses, starring DJIA index losing 2.5%.
The NYSE had opened sharply down Monday: The Dow Jones lost 2.34% and 2.65% Nasdaq.
U.S. President George W. Bush said Monday that his government was working to "minimize" the impact of financial crisis on the U.S. economy and expressed confidence in the ability of it to cope with the long-term "adjustments" in progress.
The "impact" of the bankruptcy of U.S. bank Lehman Brothers on French banks should be "limited", assured Monday the French Minister of Economy, Christine Lagarde.
Presenting the bank Lehman Brothers
© 2008 AFP (null)
Presenting the bank Lehman Brothers
AIG, the first U.S. insurer, could be the next victim of the financial crisis on Wall Street because of its high exposure to financial risk.
The action of American International Group (AIG) fell by 50% at the opening of the New York Stock Exchange, Monday. Since the beginning of the year, the insurer has lost 90% of its value on the stock market.
AIG must raise $ 20 billion to meet its commitments to investors, she wants to continue to operate.
After a weekend of unsuccessful negotiations with its main creditors, Lehman Brothers had no choice but bankruptcy, however, reaching to preserve some units, including those in charge of market operations.
This did not prevent its collapse under Wall Street, where it does most quoted at around 16:30 GMT as 0.20 dollar, while it was still more than $ 60 a year ago.
The liquidation of Lehman Brothers "could accelerate the necessary reforms of Wall Street", Judge Peter Morici, an economist at the University of Maryland (east).
Quasi-simultaneously with the announcement of Lehman Brothers, Bank of America has formalized the purchase of another big name on Wall Street, Merrill Lynch, for 50 billion dollars.
After the takeover of Bear Stearns by JP Morgan in March, the concentration of U.S. financial sector continues, as pointed out by the Director-General of the International Monetary Fund (IMF) Dominique Strauss-Kahn. "A long process" seems committed to "consolidation of financial sectors," he said to the press during a visit to Cairo.
"In retrospect, once the storm passed, the recomposition (financial sector) could be seen as a beginning of healing and mark the end of the moral hazard that weighed on the sector", say analysts CM-CIC Securities .
Logo of Merrill Lynch in New York
© 2008 AFP (Mario Tama)
Logo of Merrill Lynch in New York
The moral hazard describes the notion that financial operators that the government always intervene at the last moment to avert a crisis, which encourages them to take risks.
In the case of Lehman Brothers, U.S. federal authorities have refused to make any money.
Having spent 29 billion dollars for the purchase of emergency and Bear Stearns have hired up to 200 billion last week to keep up the mortgage agencies Fannie Mae and Freddie Mac, the U.S. government did not open its portfolio.
Without guarantees of the state, potential buyers have all passed their turn. As the Korean KDB and British Barclays.
In an attempt to curb the financial debacle, the U.S. central bank, however, took steps Sunday, accepting securities banking risky and difficult saleable in exchange for cash for banks in trouble.
In addition, coordinated action by ten major banks, American and foreign, who have established a fund of 70 billion dollars in which they can draw if they could find themselves short of cash.
These initiatives have been told the Nobel laureate economist Joseph Stiglitz that the current financial crisis should be less severe than that of 1929.
"One can of course be wrong but the general view is that today we have tools in terms of fiscal and monetary policy to avoid another Great Depression," he told AFP.
An opinion which does not seem shared by the former president of the U.S. Federal Reserve, Alan Greenspan, who said in an interview broadcast Sunday by the television channel ABC that the current financial crisis is the worst since 50 years and probably since a century.
by erectusplus at 18:14:00 |
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