It was an intriguing day on the street today as Lehman Bros. filled for bankruptcy and Merrill Lynch struck a deal with Bank of America. These actions remain a continuation of the turmoil surrounding credit, investment banks and the economy as a whole. What’s left after a 500 point index decline is Goldman Sachs and Morgan Stanley as the last investment banks on Wall St. The U.S. dollar is entering yet another phase of consolidation as dire predictions foreshadow even more collapses from smaller regional banks.
Lehman’s inability to strike a deal with Bank of America or Barclay’s or to receive some form of government assistance was a deliberate tact. Let the invisible hand take care of Lehman and the market is supposedly better for it. So who decides, exactly, what companies get bailed out, and which are left out to dry? The Fed itself has said “Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Sterns could have been severe and extremely difficult to contain.” So how is Lehman’s bankruptcy any different? The general consensus is the Bear Sterns collapse and Fed mandated bail out bought everyone enough time to attempt a rescue of the inevitable. Although the Fed was unwilling to assist in saving Lehman they were willing to lower their credit standards for the last remaining investment banks.
So what does this mean for you and I you might ask? The answer is you should probably get used to living on a budget. You most likely won’t be able to renew that lease on your BMW. You should probably start making your own coffee at home. You should definitely be thankful for what you have, because America is officially for sale! I won’t even begin to speak of the overwhelming number of job cuts in the banking industry alone. Some predict upwards of 200,000 people out of work by this time next year. Just don’t go out on any monetary limbs anytime soon.
Write a Comment