Strange are the ways of the world. Its only Friday morning and boy has it been a tumultuous week already. Worldwide there’s panic in the global markets as Lehman Brothers tanked after announcing huge losses last week & Merrill Lynch got bought over by a rather opportunistic Bank Of America. This after Merrill Lynch has written down over $40 billion dollars in assets in the last one year, according to the BBC. Of course John Thain’s (Merrill's chairman and chief executive) role in strengthening Merrill Lynch over the past few years ensured that they had people interested in buying them when the going got bad. Lessons to be learnt from Lehman Brothers’ mistake of believing they couldn’t go wrong. Add to that the $85 billion rescue package that the American government was forced to give their largest insurance player – AIG, in return for a 79.9% stake.
Wasn’t America the country that just bailed out their largest mortgage companies Freddie Mac & Fannie Mae in a deal that according to Mark Zandi, Chief Economist, Moodys, lies between $ 25 – 50 billion? Wasn’t America the country that’s spending billions in their continued invasion of Iraq? Wasn’t America the country that promoted capitalism? How can a country claim that anything goes in the quest for profits but if you make bad decisions we are going to come and bail you out? More importantly, how long can they afford to keep saving financial institutions that are in a sticky spot because of their own stupidity? One benefit that could possibly arise out of all this mess is that people might start becoming smarter to the risk exposure that they face when dealing with financial institutions. But that’s a miniscule gain for what looks to be far from a small price that is being paid.
What a difference a week makes. Last Friday I was reading about Lehman’s advanced announcement of their terrible last quarter results. Now there is no Lehman Brothers. Merrill has been bought over. Talks are on between Morgan Stanley & Wachovia to save the former. Strange are the ways of the world.
Wasn’t America the country that just bailed out their largest mortgage companies Freddie Mac & Fannie Mae in a deal that according to Mark Zandi, Chief Economist, Moodys, lies between $ 25 – 50 billion? Wasn’t America the country that’s spending billions in their continued invasion of Iraq? Wasn’t America the country that promoted capitalism? How can a country claim that anything goes in the quest for profits but if you make bad decisions we are going to come and bail you out? More importantly, how long can they afford to keep saving financial institutions that are in a sticky spot because of their own stupidity? One benefit that could possibly arise out of all this mess is that people might start becoming smarter to the risk exposure that they face when dealing with financial institutions. But that’s a miniscule gain for what looks to be far from a small price that is being paid.
What a difference a week makes. Last Friday I was reading about Lehman’s advanced announcement of their terrible last quarter results. Now there is no Lehman Brothers. Merrill has been bought over. Talks are on between Morgan Stanley & Wachovia to save the former. Strange are the ways of the world.
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