Read one of the following articles and reply to this blog with a two – three reflection paragraph. The assignment is due by COB Friday, September 19th. Please refer to the article links below:
If you have any questions please Mr. Snee.
Financial Crisis Articles
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I think that it is too bad that Merrill Lynch was unfortunately mismanaged. Now after 94 years of independent ownership it will now be taken over by Bank of America. This huge merger cost Bank of America 50 billion dollars. This will allow Bank of America the opportunity to merge the talents of Merrill Lynch with their own company’s talents. Had the deal not gone through between Merrill Lynch and Bank of America, Merrill Lynch may have had to file for bankruptcy.
I think that it seems like 50 billion dollars is a lot of money for a company that did not perform well. I think that this change in ownership will give Merrill Lynch a fresh beginning with a stronger management team. The deal between the two companies will be very good for the shareholders of Merrill Lynch. With the financial backing provided from Bank of America, this deal will allow Merrill Lynch to become stronger. This allows Bank of America to become one of the nations largest financial institutions. I think it is good that the taxpayers money was not used in this deal.
I read the Crisis On Wall Street article.
In a way it seems almost scary. This is a big scare, and the whole problem with AIG insuring other banks makes it seem like our country is at the edge of a cliff, preparing for a fall. It seems like the same conditions of the great depression, like many people could lose jobs, and all their money. I know now that AIG had money pumped into it by the government – but because of their mistakes, or people’s irresponsibility, or whatever the reason is, i’m going to be paying high taxes when i’m an adult.
So there is a lot of bad news on Wallstreet that has happened these past two weeks. Important events that can have a major effect on our economy. First, Freddie Mac and Fannie May went into high debts. So high that the government had to bail them out.
Now Lehmans Brothers Holding Inc. filed for pretection under Chapter 11 of the U.S. Bankruptcy Court. Merrill Lynch and Co. also ended up in huge debts. They were bought by Bank of America for $29 per share or $50 billion. This can either have a good effect or bad effect on our economy. Hopefully, remaining companies can hold their own and not end up in the same position as these companies. The stock market has been dropping though. If things continue this way, the economy can head down a very bad road. If they major companies can manage to stay on top though, there can be a better outcome from this whole fiasco.
To sum up what happened during the crisis on Wall Street this week, takes place with three companies, Lehman Brothers, Merrill Lynch, and AIG. All three companies face significant losses. Lehman Brothers went down in their shares from about $70 a share to about $4. Merrill Lynch went down in their shares from about $55 to about $17. Finally, AIG went down from about $60 to about $12 a share.
What had happened after all three companies realized what dangerous waters they were in was that Lehman Brothers filed for bankruptcy support. However, they said that they are still going to protect their assets and try to maximize their values. Merrill Lynch was purchased by Bank of America for 50 billion dollars. Finally, AIG was taken over by the government.
The employees on the other hand are facing a bad story all their own. Many Lehman Brothers employees have been removed and many will soon receive the same fate. One Lehman Brothers employee stated that he had many memories working at Lehman Brothers and made many close friends; being “ripped apart” from all that aggravated him very much. The toll that this crisis will have will last during our generation and has a ripple effect that is occurring as we speak.
Article Read: Crisis on Wall Street
If the gevernment is getting involved in this, then it must be a huge deal. I wonder why the Lehman Brothers are refusing to provide a financial bankstop, whatever that means, to its potential buyers. At this point, aren’t they supposed to be desperate for a buyer? It’s just really sad that all those people that work there are going to be jobless. Not only here, but in London, too. They have worked there for years and made friends with other workers. Also, by dropping nearly 94.4% in the New York Stock Exchange (I think that was it) to $3.65 has to be a terrible impact on the Lehman Brothers. They had no choice but to file the Chapter 11 Bankruptcy when they were that deep in trouble.
Merrill Lynch, however, were able to get bought by the Bank of America for $29 a share, of $50 billion dollars. My father said that they were able to locate a buyer earlier on, when they realized the danger of the economy. So, I guess they aren’t in as much trouble as the Lehman Brothers. The debt that Lehman Brothers have are going to send a ripple effect across other companies, since Lehman Brothers have formed contracts of Credit Defalt Swaps with other firms. If the economy continues like this, I wonder what will happen to the united states. The situation got a bit better when the government decided to loan money in order to help AIG with its problems. If they went bankrupt, the world’s economy would be too disaterous to think about. The thing is, that loan money is going to come out of taxpayer’s pockets. In other words, us. I really hope that the companies will be able to slove this crisis soon, because if not, then the United States will enter really hard times with the skyrocketing prices.
This article focuses on the Lehman Brothers in light of the financial crisis in our country. It briefly touches on the reason why the crisis took place mainly because of the collapse of the housing market. It doesn’t provide any solutions as to what might be done to improve our economic situation. Instead the article goes into specific details of the effect on Lehman Brothers and its subsidiaries.
It is not clear from the article whether the federal government’s not stepping in and bailing Lehman Brothers out was the right thing to do. It is sad to read about the bankruptcy of very large financial conglamorate companies and think about the people who lost jobs and many who lost ther investments. On the other hand, if the government bails out every company who mismanages its opportunites, then where is the insentive to follow sound business practices if in the end you end up on the same place.
In Ultimatum by Paulson the Government decided not to bail out the Lehman Brothers Holdings Inc. In order to deal with this situation, the Treasury Secretary Henry Paulson got together with the Federal Reserve Chairman and his New York lieutenant, Timothy Geithner. “There is no political will for a federal bailout,” Timothy Geithner said. The government had only just recently saved major moragage companies Fannie Mae and Freddie Mac which took a lot of money.
As time moved on the Lehman shares went lower and lower. They began saying that the Lehman shares misfortune would spread to Merrill. Merrill luckily was taken over by Bank of America and saved because of that. However with all this happening if the companies got bankrupt then the economy will have a lot of jobless people which could hurt the employment rate badly and it the government were to bail them out they would have to speand even more then what they have already done.
Response to “Crisis on Wall Street”
This past week rpresents one of the worst weeks on Wall Street. Several financial institutions are continuing to struggle due to their exposure in the subprime market. Lehman Brothers, the fourth largest investment bank, had to file for bankruptcy after it was unsuccessful in finding a buyer or having the government step in. Among the potential buyers was Bank of America. However, they soon backed out when they realized that it was a bad investment. Fortunately, one of their most valuable entities was acquired by Barcley’s, a U.K. based bank at a fire sale. This salvaged thousands of jobs in the United States.
Unlike Lehman, the CEO of Merril Lynch made a bold timing decision to get acquired for $50 billion by Bank of America in opposition of potentially continuing to deteriorate and continue to lose value in its stock. The combined entities makes Bank of America one of the largest banks in the world.
AIG, one of the country’s largest insurance companies, also found itself in trouble as it was unable to raise cash. In this case, unlike Lehman, the government was willing to step in as the collapse of AIG would have caused turmoil in the financial market. The government now owns 80% of AIG. It is quite obvious that Wall Street is facing serious problems. Average Americans have lost confidence in the financial markets which will make it all the most difficult for a quick turn around. In order for the recession to die down, the financial world must come together to create a true global solution and insure that policies are established and enforced to prevent such a crisis in the future. It is important for the public to restore its confidence in the financial world.
Personally, I am shocked on what is happening on Wall Street. A couple of months ago, it just seemed like people were buying houses and getting mprtgages they couldn’t afford (which shook up the economy a little) and now it has rippled into multiple huge companies possibly going out of business and the economy turning into a huge frenzy. I read the article in the Wall Street Journal, “Lehman Files for Bankruptcy, Merrill Sold, AIG seeks cash” and now I understand the chaos that Wall Street is undergoing and what can possibly hapen and what is at stake. It’s hard to believe the government, which usually stays out of economic issues, had to take over Fannie Mae and Freddie Mac becuase they couldn’t conrol their companies themselves, as well as lending billions of dollars to AIG so our entire economy wouldn’t completed get knocked out. Because of all of the bad mortgages these companies have lent out, Wall Street has been turned into a chaotic mess and a once in a century disaster. Over the past couple of weeks, people everywhere have been shocked by the changes made in all Street. For example, Merrill Lynch, a once very successful company, was bought out by Bank of America. Many people in our country would never have expected Bank of America to take over a company like Merrill Lynch. Also, Lehman Brothers, another once very successful company filed for Chapter 11 bankruptcy.
Stocks from these companies have also dropped to all time lows. The vale of these stocks fell from anywhere around 70 to 95 percent. I was shocked when I saw that Lehman Brothers only closed at $3.65 a share on Friday after falling from a record high of around $70 per share. Merrill and Lynch closed at only $17.02 per share. Finally, one of the largest insurance companies in the world, AIG closed on Friday with a value of $12.14. I understand that if AIG went under, it would cause a catastrophic ripple effect throughout the country, affecting numerous banks and businesses across the United States because AIG actually backs up many of those banks. So, the government then had to lend about 85 billion dollars to AIG. And who is going to have to pay for that? The taxpayers, also known as us, the citizens of the United States.
In the long run, this economic crisis isn’t going to affect many of the adults in this country. This economic crisis is going to affect all the younger generations and many to come in this country. We will have to deal with the economy when we are adults. The 85 billion that AIG got lent and other money used to bail out companies is going to affect us. We are going to be helping the government pay and get us out of this still when we are grown adults. Still, nobody ever expected any of this to happen, and it is a shock to everyone. The government had to get involved and these companies really did mess up our economy. And now, we’ll all be affected bt this disaster.
I had no idea that Lehman Brothers was made up of four different companies. I read the article, but there are a few things that I don’t understand. Why did the government refuse to give Lehman Brothers financial backup? They helped Freddie Mac and Fannie Mae. Wasn’t the government required to have financial backstop for Lehman Brothers? What I thought was interesting was how they managed to let the U.S. companies for Lehman Brothers keep their jobs, but the UK companies were to fire their employees to declare themselves officially unemployed.
Also, I don’t quite understand how Lehman Brothers is going bankrupt, yet they are continuing business as if nothing happened. The employees will get full benefits and salary, and partnership with other companies will remain intact. If they had enough money to keep the US companies running, then why not cut down the wage of the US company employees and at least give the UK employees their jobs back and pay them minimum wage? If the company is still running, why are the giving the stocks to other companies to take over?
Although I understand that people would want to withdraw their stocks from Lehman Brothers, I don’t understand the concept of trading stocks. Why would companies want to buy Lehman Brothers if the company is going bankrupt? The last paragraph at the end tells about an employee from Lehman Brothers. I thought that the employees were permitted to keep their jobs. In conclusion, I didn’t really understand this article. I understood that Lehman Brothers went bankrupt and the government didn’t want to backup their financial losses, but I don’t get how or why Lehman Brothers bankruptcy were the way they were.
Dear Mr Snee,
It is clear that the problems Lehman Brothers, Merrill Lynch, and AIG are facing will be faced by more companies. If the US housing market continues to decline it will cause more economic turmoil. I never knew how much home prices and home loans could effect the US economy. I understand why big companys would invest in something as important as homes but the article does not explain why these companies did not change their investments when home prices began to drop. It is also not clear why the government bailed out Fanny Mae and Freddie Mac but not the others.
I understand that some times people don’t pay there bills/mortgages because they loose their job which would cause the problem with these loans but these companies do much more. I think one simple solution for the future would be to force these companies to prevent one part of the business from effecting the other parts. I not sure how to do this, but talking about the problem and not solutions does not make sense either.
Thats like saying because someone doesn’t study the teacher won’t give the test.
I hope the government’s support works, because if it doesn’t it will waste all of that tax payer money which will hurt the US further.
I’m impressed by the sophistication of many of your comments! The current financial crises continue to evolve and we face uncertainty and insecurity that may turn out to be unlike anything in our country’s history. If any of you read only the one article on which you commented, I urge you to read the others for a broader view, and to continue to pay attentionto this issue. (The third article, about BOA to buy . . . ., appears now to be available only with a subscription.)