AIG:
Insurer American International Group Inc struggled for survival a day after a financial tsunami swept away investment bank Lehman Brothers and forced the sale of rival Merrill Lynch in the biggest financial industry shake-up since the Great Depression.
AIG (NYSE:AIG - News) scrambled for a financial lifeline on Monday after investment bank Lehman Brothers Holdings Inc (NYSE:LEH - News) failed to find a rescuer, and Merrill Lynch & Co Inc (NYSE:MER - News) agreed to be taken over by Bank of America Corp (NYSE:BAC - News).
Wachovia:
Shares of Wachovia Corp. dropped dramatically Monday as the investment community’s concerns over the exposure of big banks to bad mortgage loans intensified.
Wachovia, the fourth-largest bank in the country, saw its stock price fall by $3.12, or 21.9 percent, to $11.15 in afternoon trading. Wachovia’s stock price has already dropped by more than 70 percent from a year ago.
Washington Mutual:
Standard & Poor's on Monday cut its ratings on Washington Mutual Inc (NYSE:WM - News) into junk territory, citing exposures the bank has to bad mortgage debt and volatile markets.
"The company's weak equity pricing in the markets is also a concern, and it increasingly appears that market conditions could overtake credit fundamentals and leave the company with greatly diminished financial flexibility," S&P said in a statement.
Oh yeah -- keep your eyes on every other financial company out there.
6 comments:
S&P just downgraded AIG. They are probably done for - much more so if Moodys follows suit and downgrades AIG too. Wonder if Paulson will find some pseodo-legal way to give them $100 billion or just let them BK.
Moodys followed suit just a little while ago. I don't really understand the full implications of an AIG implosion - but I do know that they carry a bunch of insurance in the country. For instance, they have a huge line of medical malpractice stuff. (I work part time for a law firm and we have a ton of AIG insured clients.)
Grandma Jo
It looks kind of dire situation for AIG, and WM.
I hope my money is safe. I have accounts at both companies.
I'm voting Democrat this time. I don't need this kind of head-ache.
I'll wait for the SPX to reach 1100 before trying any long positions. I suggest any of you do the same as me. Better to be overly cautious, than a fancy's fool.
Hey Bonddad,
I love your blog. I used to wait for your posts on Daily Kos, but now I just come straight here. I have to admit, I don't understand a lot of what you cover, by I think I get the general idea. I am hoping that you can answer something that I don't yet understand:
Who gained from all of this?
From your post early Monday am:
1.) Incomes shrank for most Americans over the last expansion.
2.) But Americans kept spending thanks to a mammoth increase in household debt.
3.) To increase the amount of debt in the system, lending standards were lowered.
4.) Lowered lending standards have led to a higher default rate from borrowers.
5.) Higher default rates have lowered the value of all the collateral backed by mortgages.
6.) Lowered collateral values have killed the balance sheets of literally every major financial company.
It is my understanding that industry lobbists (i.e. the financial industry itself) pushed for the regulation changes that allow for point 4 above, the "Lowered lending standards".
Is this true? If so, what was the expectation at the time, how did they (the finacial industry) believe that these lowered standards would benefit them? Secondly, did it work?
Clearly the changes in the regulation were not good for the companies of Bear Sterns, Merill Lynch, Fannie Mae, Freddy Mac, etc. But are there companies out there who are doing well from all of this? Are there individuals that knew what they were doing and got out just in time with their millions right before it all came tumbling down?
Any insights that you have would be appreciated.
Thanks.
who gained from this?
Basically: anyone that received cold hard cash from the financial giants. (from the Ceo's to the employees, and anyone else that was able to invoice them). People who would otherwise be freaking about how deliver %4 returns year over year benefitted for a few years (and took their bonuses). Some people got the priviledge of owning a home for a few years, and the indignity of having it taken away. The people who are really going to benefit are those with a mountain of money who will be able to snap up assets on the cheap.
oh- and the repo-guys- they are doing gangbusters.
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