Riz Khan - Wall Street woes - 15 Sep 08 - Part 1
Al Jazeera English
Transcript
hello and welcome the study of Economics is often called the Dismal science and considering recent developments in the US markets even economists might agree Wall Street a worked to The Disappearance of two of its Giants lamon brothers and Mara Lynch and some have compared the crisis to the Great Depression of the 1930s the fall of L Brothers is the biggest bankruptcy in American history it was never an ordinary Bank founded 158 Years Ago by a German immigrant it grew into a multinational giant serving major corporations governments and municipalities worldwide today its debts total more than 600 billion dollars and as mentioned Layman wasn't the only one to shock the landscape of American Finance maril Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avoid a deepening financial crisis on top of all this the world's largest insurance company American International Group known as AIG says it was days from falling apart the governor of New York offered some temporary relief but the company could need up to $40 billion to get back on its feed so just what are we to expect over the next few days and how will the instability in the US markets be felt around the world don't forget you can join the conversation anytime joining me today is lakman autan the managing director of the economic cycle Research Institute in New York the ECI forecast national and international business and inflation Cycles he's the author of beating the business cycle and from Paris we have Max Kaiser who's been involved with markets and finance for 25 years he began his career as a stock broker on Wall Street after graduating from college and went on to become a Pioneer in prediction markets welcome to the show gentlemen and uh lakman I'm going to start with you with a question to what extent do you see the uh the latest developments in the banking sector as an indication of wor to come for the US economy uh well it probably is indication of worse to come or a slight recognition of what's been going on I mean uh these failures are part of the process of the free market kind of dealing with uh excesses in a somewhat darwinian way uh very violently sometimes and eventually that the that'll set the stage for recovery but I'd like to step back for a second uh and and look at this in context um in 2006 we began the home price declin in 2007 the credit crisis erupted those are at the epicenter of all of these bailout stories that we've been hearing about in 2008 what's new in 2008 is that we have a recession in the US which is really exacerbating those uh bigger issues it's like the big issues the 800 PB gorilla is really the home price decline and the credit crisis and and this elephant in the room that that not everybody wants to admit but which is causing a a lot of havoc and really agitating this gorilla is is the recession with with job losses and the way that that kind of makes all of these things continue to spiral down well Max Kaiser I know that you think the US economy and the US dollar are essentially finished so what happens next for America well let's uh focus on uh this uh idea of free markets as was uh just mentioned sure you might expect for a banking crisis to cycle its way through uh or recession to cycle its way through what's interesting at this timer is is that the entire notion of free markets in the U us anyway is being challenged because the federal government is taking onto its balance sheet trillions of dollars worth of debts and in effect nationalizing uh huge portions of the banking industry and there's talk now of them nationalizing the Auto industry nationalizing the airline industry so this is really almost as if America is throwing in the towel on capitalism and saying well we tried it it didn't work we're going to go socialist uh we have a Federal Reserve Bank that sets interest rates according to a pullet bureau there's no Market Discovery or Price Discovery for interest rates and the federal government is now running the show and it's really quite a climb down for an economy in a country that at one time considered itself to be a beacon of free market Enterprise but those days are now behind them Max should the rest of the world be worried yes I I think the rest of the world should be worried and as should the policy maker are they yeah I think they are worried I I I mean I'm I'm sympathetic to what Max is saying as well and and it may be uh that to a degree I think the the policy makers have themselves in a in a very uncomfortable position because they are these supposed proponents of free markets and then they're bailing things out largely because they didn't uh you know they let this thing get out of control is really what happened uh you know and now they're really having to do things that I I think they're very uncomfortable doing when we look around the global economy uh you know was this notion uh a while back that there could be some decoupling that the US could kind of take this this this downturn uh and and the rest of the world could go on its merry way uh what you're seeing uh become very evident this year uh probably started around the second or third quarter is that the rest of the world is turning down as well I mean you have a a Glo a pervasive Global downturn punctuated by recession in the US and southern Europe perhaps in Japan uh I mean you it's a drastic situation where you even have uh CH the the Bank of China the Chinese government cutting uh interest rates today for example well ma Max do you think the world rest of the world should be worried and also um how you when you look at some of the things you've been saying uh how the US is bailing everyone out and essentially nationalizing as you put it can you think of any other government that would spend this kind of money that would go all out to to start saving its banking sector its Airlines and so on sure the Soviet Union Circa 1955 now you have the USSR the United States socialist republic but let's talk about decoupling for a second because that's an interesting point uh decoupling is uh rumored or it's been talked about and the guest your guest is right there there's been some synchronistic downturn in the global economy as these other countries try to work off billions hundreds of billions trillions of dollars of the bad debt that were sold to them by America but once they get rid of this bad debt and of course the bail out of Fanny May Freddy Mack was quite convenient for the Chinese who were guaranteed the bonds to made hold on their bonds while Americans who hold the stock got zero so here you have the US government favoring the Chinese Masters as it were and leaving the American shareholder swinging in the wind so uh I think once these foreign Banks uh get rid of this bad paper this toxic American debt then this decoupling process we we'll see this decoupling process Chinese economy has slowed down but instead of growing at 12 or 13% a year I think they're growing at only 9 or 10% a year I mean America would uh be happy with that kind of growth it's phenomenal growth and uh they've already started to stimulate their markets and their economy uh this week so I think the Chinese economy is going to go back on the uh the high growth path pretty shortly here in a short time but Max then tell me how you would handle it I mean if you're saying that the uh you know that this is this is basically a Soviet era method of of bailout then what would you suggest I mean could could America afford to let these these large organizations Freddy Mack Fanny May and so on go down okay yeah sorry uh but they can't afford not to let them go down in a way because by giving these companies like Fanny May and Freddy Max some assistance they're actually prolonging The Agony and the pain they're not letting real estate prices fall to their natural level where there might be demand for those properties they're actually making the situation a lot worse the problem in America is that after being the Empire of the world for so many years they've grown they've grown fat and lazy they don't want to experience even five minutes of a recession so the Federal Reserve keeps pumping all this airsots money into the economy and for every dollar of GDP growth it take something like five or6 dollar worth of fresh debt So eventually you can't you know I think I I like it into a f Gua Farm where you're stuffing the ducks with the grain to get them to this enormous size but eventually you can't do it anymore you've got to take that liver out you've got to harvest the Ducks and this is the problem America faces right now they can't stimulate themselves with any more debt they've got to actually they've got to have a severe contraction right now to get back to some kind of normality but I don't even think that's possible at this point lman let me ask you then well lman let me ask you then if if you know obviously lemon Brothers was a surprise to many people the government didn't step up but of course if it comes to a Goldman Sachs or if any of the others start to struggle what happens do you expect America to stick by its no bailout policy that it seems to have at least for this weekend um I think it'll try uh at this point what what's going on I think is a a very belated or weird recognition of the fact that we are in recession uh and you know this is happening with a backdrop of an election which really skews things but uh I I think ultimately you know this recession train has left the station it's going to run its course there's going to be a lot of collateral damage along the way uh and that's putting it mildly uh which we're seeing unfold here um but to the point of uh also to decoupling and I think there's one area where we may disagree U myself and the other guest is that I think it's more than just about debt you know it's also about uh this the inter relationships of demand and around the world and you know the Chinese do very much have a stake in the continued health of the US economy because of the sheer amount of consumption that goes on here uh so we do have ourselves in This Global synchronized downturn punctuated by recession I think you're going to see more recessions probably concentrated in Continental Europe uh and and this is going to be a rough ride for as far as we can see which is at least a few quarters let's hear what our two phone callers have to say before we take a break Ali in London first Ali what would you like to ask uh my question is is uh perhaps comment first and then question is uh I think what allowed uh what we've seen in recent weeks and months in terms of financial institutions and particularly those basing in America it is the accumulation of a huge wealth uh which uh the fundamental uh assumptions or fundamental basis which allowed them to accumulate such wealth is globalization and free market okay don't we need to question those ideologies I mean because the affair impact in in terms of global economy is unbelievable and unrecoverable to some degree okay we need to question the theories behind globalization and free market okay great now let's get to Abdullah on from Morocco as well Abdullah what would you like to ask uh good evening regarding Maryland don't you think Extreme overexpansion Plus mismanagement plus High salaries for top management and high premiums at the end of the year and bonuses and share ownerships and extreme overexpansion regarding both companies thank you okay gentlemen I'm going to take a short break here we'll get to answers for those two questions from our callers as soon as we get back stay with us for more on this topic
Russia's financial crisis_Sept 17 08
Al Jazeera English
Transcript
anxious faces at moscow's myx exchange is trading began after big losses the previous day no one wanted things to go the same way again on Tuesday the value of the market dropped so far so fast the authorities were forced to suspend trading when the dust cleared the exchange had suffered its biggest one-day drop down 177% Russian stocks were hit in the summer because of the war in Georgia but this was bigger much more dramatic and the reason seems to be that the markets got worried about what was happening elsewhere and there was the drop in the oil price below $90 a barrel and oil is a big economic driver here also affected was the dollar dominated RTS exchange down by 11% Russia's finance ministry and Central Bank have been quick to react pumping billions of dollars into the markets we have one of the biggest uh cash reserves uh during the history of Russian economy and you see if we compare the situation 10 years ago most of the Russian companies which were traded 10 years ago they grew for eight uh they grew eight uh8 10 times so the fall for 30 40 even 50% from uh from the pick points it's not dramatic for the companies on the streets the big wobble on the stock market had little impact most people know it's going on but don't feel directly affected it bothers me but I haven't heard or seen anything that has consequences for me I hear about it but it doesn't impact on my everyday life I sleep well the Russian Market slept up at the opening but dropped again forcing the main exchanges to once more suspend trading one analyst says Russia's economy remains strong there's a short-term Story and there's a long-term Story the short-term story is yes we're worried about where the market is the long-term story is the fundamentals behind Russia still look pretty good now that's not a that's not great for short-term investors like right now I mean if you've been holding gas problem you're getting you're getting killed in the market nonetheless long term it's it's a much more optimistic picture even with its energy wealth and huge cash reserves it was inconceivable the global economic troubles would not have an impact here the authorities though will be hoping the consequences are less damaging and less long lasting than elsewhere Alan Fischer Al jazer Moscow
AIG Bailout Makes for Chaotic Trading Session
Associated Press
Transcript
with anxiety still running High even after the $85 billion government bailout of AIG the Dow Jones Industrial Average dropped more than 300 points in midday trading I'm expecting it to still be choppy you know it's like banging on a big Bell you know it reverberates back and forth and uh it's going to take some time for those reverberations of the last few days to play out and calm things back down so I think we're going to see a lot of volatility a lot of up and down movements according to analysts the fear gripping the market reflects investors concerns that AIG was not able to find a Lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter the two independent investment Banks left standing Goldman Sachs and Morgan Stanley remain under scrutiny as does Washington Mutual the country's largest Thrift Bank meanwhile a new government report on new home construction gave investors even more to fret over the Commerce Department says housing starts fell by 6.2% in August to 895,000 units the slowest building Pace since January 1991 Diane kepley the Associated Press
Government Steps in Again, Bails Out AIG
Associated Press
Transcript
the stunning government takeover of AIG is most far-reaching intervention into the private sector ever for the Federal Reserve the $85 billion bailout gives the government a 79.9% stake in AIG one of the world's largest insurers the move was the second time this month the feds put taxpayer money on the hook to rescue A Private Financial company uh I think it's a it's a positive for consumers uh it may cost taxpayers money uh but if we're patient and and we give it a chance to work itself out it probably won't be too bad the the flip side is that if we let it fail I think it would have cost consumers much more directly even with the bailout Wall Street is still skittish about the stability of the financial system the Dow Jones Industrials were down more than 200 points in early trading I thought that the most recent uh Calamity had been averted and as a result we would probably see a knee-jerk reaction to the upside but possibly we ended up getting that upside yesterday afternoon as Whispers had possibly circulated that um some sort of a deal was near uh and that today people are just right back to where we were the day before feeling very uncertain about the second half of the alphabet and uh and whether we're going to have many more companies where their uh liquidity crisis will have to be addressed the government's move was similar to its $200 billion bailout of mortgage Giants Fanny May and Freddy Mack but was a reversal from its stance just a few days ago the government refused to use taxpayer money to bail out Leman Brothers which left the bank with no choice but to file for bankruptcy protection on Monday Diane kepley the Associated Press
Investors Hope AIG Bailout Will Soothe Markets
Associated Press
Transcript
there is a small sigh of relief here on Wall Street after the federal government announced an $85 billion bailout plan for the insurance giant AIG the company was on the verge of bankruptcy but Federal officials decided the company was just too big to let fail especially given the current state of the economy the subprime mortgage crisis already claimed be Sterns maril Lynch Leman brothers and AIG as the world's largest insurance company they have 74 million clients in 130 different countries the announcement has already rebounded the Asian and European markets and investors here on Wall Street are hoping that the announcement can do the same in New York Bonnie go the Associated Press
White House Defends AIG Takeover
Associated Press
Transcript
our economy has the strength to be able to deal with these shocks to I I can understand why a lot of Americans would be um confused as to why this company and not another company uh would get access to Federal while why any company I think that this is we are dealing with very challenging times and secretary Paulson and secretary I'm I'm sorry um the FED chairman Ben banki and his the president's economic advisers had determined that there were some of some of these companies were so B that to allow them to fail would have um caused even greater harm and damage to the economy so the goal has been to take action where necessary to promote stability and strength in the marketplace so that we can prevent or limit more damage to the broader economy
Dow Plunges Despite AIG Rescue
CBS
Transcript
another anxiety attack on wall street even after the aig bailout the dow tumbled another 450 points like bang on a big gong you know it reverberates for a while and we're dealing with that reverberation right now and we're getting these waves of very uncomfortable feelings in the pits of our stomach among the worst hit the two largest surviving independent investment banks goldman sachs and morgan stanley plummeted 18 and 26 percent it's a fear that they can put pressure on those folks they can do it to anybody the fed had hoped saving aig would calm the markets agreeing to lend the insurance giant 85 billion dollars at a steep interest rate now more than 11 percent in return the government gets a nearly 80 percent stake in aig company management is replaced the government will have a veto power over major decisions and the right to inspect aig's books at any time the rescue package was worked out in an emergency meeting at the federal reserve in new york yesterday as the clock was ticking towards aig's bankruptcy after private banks said they couldn't come up with the cash the fed agreed to consider a loan at 3 30 fed chairman ben bernanke went to the white house and informed the president of the possible deal at 5 pm the fed laid out its terms to aig and gave them an 8 o'clock deadline to accept at 6 30 treasury secretary paulson briefed congressional leaders at 8 pm aig agreed to the terms within an hour the deal was being signed that averted a crisis in financial markets it would have been catastrophic in the words of some officials there would have been dominoes falling because of aig's failure because the trillion dollar company is at the heart of the financial system ensuring much of the money that moves between banks and investors they ensure a lot of the mortgages and mortgage-related securities that are now defaulting and as a result undermine their own financial health aig has two years to sell off assets to pay off the government loan so is this the end of government bailouts the white house wouldn't say so they're taking this on a case-by-case basis and we will have to continue to do so banks meanwhile are hoarding cash reluctant even to lend to each other that's driving up interest rates and could soon affect your monthly payments if you have an adjustable-rate mortgage and anthony we're hearing a couple of other financial institutions are looking to merge or be sold is that right that's right as you heard earlier as you mentioned earlier the reports that wama washington mutual has actually put itself up for auction reports that wachovia has approached morgan stanley basically after what happened to lehman brothers anybody who feels vulnerable even to rumor has got to protect itself and that's what's going on all right anthony mason anthony thank you
Economic Reality Check
CBS
Transcript
as news of the AIG bailout rocked Wall Street both candidates were ready with new ads both looking straight into the camera and both promising serious reform I'll reform Wall Street and fix Washington end the anything goes culture on Wall Street with real regulation McCain in his latest stump speech also promises he will stop the Wall Street abuses before they begin and we're going to enact and enforce reforms that make sure that these outrageous and they are outrageous never happen in the first place here are the facts McCain admitted as the mortgage crisis was happening that he never saw it coming I I'd like to tell you I did anticipate it but I have to give you straight talk I did not McCain also said he did not know how to help homeowners without also bailing out Speculator but I can't come down yet and give you a specific uh solution because I don't claim to be smart enough Obama meanwhile claims that he saw the Meltdown from the start and introduced a law to stop the shaky mortgages I introduced legislation to stop mortgage transactions that promoted fraud risk or abuse this claim is true in fact Obama introduced this 2006 Bill to curb abusive lending but this was one year into Obama's Senate career and the bill went nowhere as for Obama's claim that McCain was nowhere this claim is false the fact is in March of 2005 McCain co-sponsored a bill to impose new oversight on Fanny May and Freddy Mack but this bill died Obama also charges that one of the Godfathers of banking deregulation Phil Graham is still one of McCain's top advisers and a banking lobbyist you remember Phil Graham he's the guy who said that we were just going through a mental recession and who called the United States of America a nation of WI Phil Graham in fact was a lobbyist for the Investment Bank UBS through April of this year he formerly left the McCain campaign in July Senator McCain meanwhile has shifted gears on using taxpayer funds to prop up AIG yesterday he was against all federal help today he said the government was forced to act and should protect people holding AIG insurance policies and retirement accounts Wyatt Andrews CBS News Washington
Feds Save AIG
CBS
Transcript
the federal government loans american international group aig 85 billion dollars to prevent the nation's largest insurance company from collapsing early show national correspondent Jeff Glor is at the new york stock exchange Jeff good morning hey Maggie good morning to you should be very interesting to see how the markets react today after for the second time in a month the government uses taxpayer money to save a private company yes it is Uncle Sam to the rescue but oh what a price tag faced with the prospect of a trillion dollar company failing and the further crisis in confidence that could have triggered the Fed decided they had no other choice discuss this unprecedented 85 billion dollar loan will shore up a massive insurance company and give the government and eighty percent stake this is a this is a very big deal because by bailing out a IJ it's essentially bailing out the entire banking sector it's a move that seemed unthinkable only a few days ago but these have been a few days that changed Wall Street forever Lehman Brothers bankrupt Merrill Lynch sold in haste now AIG another outfit stunned when bad bets in the subprime mortgage market came boomeranging back on the trading floor Tuesday was another wild day for stocks swung up then down then up 141 points despite calls to rally the market with a rate cut the Fed left its key fed funds rate unchanged at two percent primarily over concerns about inflation but it's not all down news your 401k may be tanking but your gas tank is smiling the price of crude oil is now fallen $55 or thirty seven percent since it peaked in July because of the slowing economy and decreasing demand there's talk of the national average for a gallon of gas soon dropping below 350 even more amazing when you consider Hurricane Ike was supposed to push prices way up the market more powerful than a massive hurricane but still not done weathering the storm if you're going to put this into a baseball metaphor I think we're in the sixth inning of a nine inning game and this isn't a doubleheader there is also talk this morning of the feds trying to find a buyer for Washington Mutual and also Morgan Stanley potentially partnering up with a commercial bank and Maggie we should mention by the way that if a aiji's stock rebounds those taxpayers do stand to reap a benefit of profit from this if that stock goes back up again because the government is now an equity stake holder all right so fingers crossed CBS is Jeff Glor the New York Stock Exchange thank you now here's Harry all right thanks Maggie let's talk about this bailout of AIG with liz claman from the Fox Business Network good morning Liz good morning Harry all right it was AIG just too big to fail well I haven't we heard that about Fannie Mae and Freddie Mac but apparently the US government Treasury Department insurance executives and real experts were saying that yes AIG would have been too big to fail I know this sounds like a broken record but they did what was called a stress test over the past 48 hours and they've tried to figure out what Harry would happen if AIG went under and they put it as catastrophic where is the penalty for these bad business practices where do these guys so the CEO is let go but hello these guys have been think they've been gambling with a house money for years and it's our job to bail them out apparently so and you know what's fascinating Harry is that last night late the Treasury Department held a quickie press conference and they were trying to explain it's a stretch to call this a nationalization it's a stretch to call it a bailout the US government is not getting in the insurance business but in essence they really are they're taking an eighty percent stake in the company and yes a CEO or a board member here and there gets let go but just two days ago you and I were talking about Lehman Brothers and talking about the fact that these companies and I use the analogy pulled themselves up to the gambling the roulette table and they lost and suddenly it's it's your problem they didn't know when to back away does the federal government have unlimited funds to continue bailing out businesses that made really bad decisions your your funds are their funds that's us so if you talk about taxes and you wonder where is this all going limited funds you would think that they have because we're now looking at Fannie and Freddie and man rescue and then the situation with AIG of 85 billion dollar loan although I talked to some people really quickly this morning who said this is actually an investment in the US government could end up depending on the terms of the LOM make some money here there's been some suggestion that there be like a resolution trust remember during the S&L crisis in the late 80s Early 90s this government entity got together they gobbled up all these bad assets and then sold them off piecemeal until the crisis past might that be an alternative you know we're getting to that point Harry it's a great point to bring that up but I'll tell you something it looks as if if you talk to people who are looking at the situation they say okay this is it finally now but we heard that with Bear Stearns being bought by JPMorgan back in March we then heard it with Fannie and Freddie okay that's the worst these more gigantic mortgage companies right now that they've been rescued it should be fine and here we have a IG I'm not betting that this is over in any way shape or form and in the end just very quickly AIG this is not about your life insurance a policy or anything like this these were the policies that they wrote on those crazy instruments that helped raise the money for all those bad mortgages that have gone under in the last two you exactly your auto policy is safe your insurance your general insurance life and home that's safe no these were these credit default swaps and not to get too complicated but yes wealthy sophisticated investors made bad bets and they had a IG ensuring them and when these all went down AIG began to falter very badly to the point where the government has now had to step in there you go liz claman pleasure thank you so much to appreciate it anytime
A Wall Street trader's walk
CNN
Transcript
. Traders seemed to be in a rush to get to work despite the carnage, but the Wall Street bull once again was going nowhere. Smiles were rare, except if you worked elsewhere. Why are you the only man smiling on Wall Street this morning? I'm just happy to be alive. I've got to go this way. Alan Valdez has seen the stock market go in one direction, down for months. The whole industry is in flux now. Everybody's worried about the financials. It would be a bad opening. UBS, I sent you. Thank you. That seller back from yesterday? He's not back. He has checked in. Got it. Thank you. Thank you. All my indications right now are all on the sell side. Everybody wants to sell? Yes, right now. Everything I've got is on the sell side. GPJ, I sent you $14,000. Even the pros like Valdez are shocked by what's happened. I've never seen markets like this. I've never thought I'd see the day when there's no more Merrill Lynch. I've never thought I'd come in and see Lehman and Merrill both gone in the same weekend. So things are really monumental down here. They're really historical, what's going on down here. ABC. ABC, sell 7,000, pair 1,000. How do you trade now? Well, you know, you've got to be cautious. You really do. You've got to be very nimble. You've got to play very safe because the markets can turn around. Valdez calmed a client. Right. Why buy? Because you've got all sellers here. There's the old argument about, the greatest fear is the best time to buy. Is that out the window at a time like this? Yes. I would wait till the dust sells. I'd rather miss the bottom and you still have time to get in. Traders were most nervous about the fate of insurance giant AIG. Today, everyone's going to watch AIG. Goldman's out. AIG is still the question mark. What happens there? But then, we're going to have Washington Mutual. We're going to have Wachovia. You're worried there are more skeletons out there? No question about it. But how big's the graveyard? We don't know. Richard Braugh. CNN New York.
Barclays Lehman deal
CNN
Transcript
Barclays said just a few days ago, no thanks to buying Lehman's all out, but it now wants this little bit. What should we make of Barclays' decision, do you think? Well, we're just listening to the Barclays conference call. John Varley, the group CEO of Barclays, is on the phone as we speak. I just listened to the first few minutes. And his justification for all of this is that they did not, of course, want all of Barclays. They were looking, sorry, not all of Lehman's. They were pinpointing certain parts of Lehman's. What interests them very much is the parts that are in New York. And he's talked about that this was at a, they would only buy it at the right price. And he said that it's, that Barclays would have minimal exposure to the bigger, wider problems of Lehman's. And so really what they did is they said they looked at it last week. They looked at it some of the week before. They knew this was a possibility coming up. They were not interested in buying all of Lehman's, but they were very interested in buying Lehman's. These parts, especially the U.S. broker dealership and especially the real estate of the Lehman's building in Manhattan, Anjali. Barclays says that it can still back out of the deal if it's not all done and dusted by September the 24th. How great do you think is the scope, Jim, for it to fall apart? Well, they have to still go to the bankruptcy judge and they have to actually get permission to purchase these assets. And so that's where we are right now. But they say that it will immediately add profitable parts of businesses right into Barclays. And so they say that this is not a long-term issue. They don't think it will just come around one day. They say they want to get these 10,000 Lehman employees right into getting back to work and they want to do that right away. And they say it will be cash positive right away. So Barclays is very, very excited about this. You could hear that on the conference call. They think they've gotten a great asset at a great price and they're very keen for the bankruptcy judge to get this done. And so they can start trading as Lehman as a subsidiary of this big UK British bank, which is based here in London.
Future of Lehman's staff
CNN
Transcript
Not willing to talk, sorry. It is what it is. Few wanted to talk at Lehmans. Not surprising, inside this impressive building in London's Canary Wharf, the future of about 4,000 employees is on the line. This trader was still reeling uncertain about what the future may hold. It's terrible just, so it is with the way things have went. I have a job now and rent to pay. I was in the pub all day yesterday, so it was, and I'll have to just work it all out. So it is just dreadful with the credit crunch and the recession, economic turmoil, you know. Are you going to have a tough time now? Yeah, very tough. And this man is just glad to have started a new job. I'm one of the fortunate ones. I resigned a few weeks ago. Today's actually my last day. I started Barclays from next week. So I'm one of the very few fortunate people, but everybody else I know, they are frantically contacting agencies, contacting people, they are other firms. There was little sign of industry outside the investment bank. Many staff had reported to work, but there was nothing to do except watch a FTSE ticker that no longer included laymen's. So they will have lost bonus, which is generally paid at the end of the year, which for most investment bankers is what they work for, the salaries sort of cap out, and then you work for your bonus. They will have lost stock options, so most people will have got into big banks because of the security and they can invest in the stock as well. But at the moment, people aren't even sure. They are not sure. They are not sure. They are not sure. People aren't even sure if they are going to get paid. But the upside is recruiters are already on the lookout. Monday morning the phones were just ringing constantly and today our consultants have been in Canary Wharf just meeting laymen staff all day. It seems that there are still some parties who want to build businesses from a strategic point of view and there are other banks and financial institutions who might be potentially interested in hiring key individuals or key teams of people. And it seems some people at least have already found a way to get paid. The !
Policy-holders mob AIG office
CNN
Transcript
Hundreds of people were lining up in Singapore outside the Asia subsidiary of AIG. This subsidiary is called AIA and many people here were very concerned about its financial health despite the company's insistence that it has enough capital in order to meet and make good on all of the policy claims despite the fact that the financial health of its parent is in doubt. Now people were waiting in line for over an hour. Some of them were very concerned saying that they were hoping to cancel their policies in order to try to get their money back from AIG. The company officials were passing out their own statements saying that they did have enough money in order to try to make good on these policy claims. They also were handing out press releases of the Federal Reserve, straight from the Federal Reserve, trying to explain what that bailout really means. Of course, they were not able to get the money back. They were not able to get the money back.
Economic Issues Rise to the Surface - NYTimes.com
The New York Times
Transcript
I'm John Harwood with the New York Times and CNBC for the past year the ongoing crisis in the housing and credit markets has set a gloomy backdrop for the 2008 presidential race fueling voters anxieties about the economy and their desire for change now the Meltdown on Wall Street threatens to deepen those anxieties and provide John McCain and Barack Obama with the campaign equivalent of what Hillary Clinton once described as that 3:00 a.m. phone call that presidents received it's not yet clear who might benefit but increased attention to economic trouble more closely fits Obama's campaign strategy as the Democratic candidate seeking to replace an unpopular Republican president Obama has always been better positioned than McCain to capitalize on desire for Change and with voters calling the economy their top priority Obama has made the issue his central theme but by choosing Sarah Palin as his running mate John McCain managed to shift attention back to cultural issues over the past two weeks and that helped him rise in the polls with a focus back on the economy today McCain the crisis on Wall Street as an argument for the reforms he says the Republican ticket will bring to Washington with a republican in the white house now McCain AIDS acknowledged that's not an easy argument economic policy has never been McCain's specialty and to judge from her interview on the subject with ABC's Charlie Gibson last week it may not be palins either but Obama hasn't yet seized control of the economic debate though polls show Americans favor him over McCain on the issue his Advantage lately has narrowed moreover poll show a plurality of Americans consider Obama a riskier choice than for president than John McCain Obama will now try to convince voters the biggest risk lies in McCain's support for Bush's principal economic policies most conspicuously on taxes in particular he's seizing on McCain's comment today that the fundamentals of the economy are strong McCain Aid say that's a distortion I'm John Harwood Chief Washington correspondent for CNBC
The Impact on Investors - NYTimes.com
The New York Times
Transcript
when everyone woke up to the headlines on Monday they saw a whole bunch of dislocation Leman Brothers declaring bankruptcy Merill being taken over by BFA concerns about AIG and the initial question that most people asked and that they were asking on NY times.com today is well what happens to me the everyday investor what does it mean for my 401k for my pension what does it mean for my savings account these are difficult questions to answer um but we can take some comfort from is history you know these sorts of dislocations have happened before uh and you know one of the things it's very difficult to predict is exactly how they will play out when they will end and where the bottom is some people might be tempted to say pull all of their money out of the stock market that's you know invested in in equity mutual funds in in their 401K accounts or other similar accounts or they might be tempted to stop purchasing uh stop making any investments in their 401K at all uh but that's a that's a very complicated thing to try and predict in terms of figuring out when's the right time to get out and then of course when's the right time to get back in again there's a lot of professionals who are going out of business right now because they were not able to make those very same predictions for those of us who are everyday investors looking at the long term it makes most more sense to just continue to invest uh and hope that eventually the markets reach your bottom and that they'll bounce back up again as they always have and that they probably will in the future now that said for folks who are shorter term investors say if you're saving for uh a down payment on a house uh It generally makes sense to have money like that in in cash or a money market account where it'll be safer the difficult question right now is uh what people on the brink of retirement ought to do uh it's a it's a terrible thing to have happen to see the markets go down 20% when you're at the age of 65 and getting ready to uh sort of go out on your on your pleasure craft uh those folks are in the toughest spot of all right now and for some of those people it may mean working a few extra years or it may mean um you know sort of cutting back on their spending initially in the hopes that at least the part of their portfolio that's still invested in the stock market will do a little bit better uh come 3 to 5 years from now and that'll allow them to spend a little bit more in their golden years I'm Ron lber the year money columnist for the New York Times
The Weekend That Changed Wall Street - NYTimes.com
The New York Times
Transcript
it was the most dramatic weekend in Wall Street history I'm Andrew rorin for the New York Times Leman Brothers files for bankruptcy Bank of America buys maril Lynch perhaps the most storied name on Wall Street the Thundering Herd of Brokers around the nation and now lingering questions over what happens to AIG the large insur could it be next when you step back and take a look at what's happened over the past couple of days at the center of it is the Federal Reserve at the center of it is the treasury the government trying to figure out what to do amid this crisis of confidence as a result of subprime mortgages and bad bets on Commercial Real Estate if you look at what happened to Leman Brothers in the end the government said no more no more bailouts no more rescues at the same time you had maril Lynch people Beyond Wall Street may not have appreciated that that firm may have been on the precipice of collapse as well and in many respects the acquisition by Bank of America of Merill Was An Elegant way to staunch the bleeding knowing full well that Leman Brothers was going to collapse this was a way to stem the tide now the big question is whether AIG the large insurer is next the rating agencies have effectively threatened AIG saying that if AIG does not raise an additional $40 billion worth of capital that they would be prepared to lower their credit rating the ramifications of that are huge what would happen in that instance is that all of the counterparties the people that effectively traded with AIG the covenants would be broken and they would be able to get out of many of those contracts effectively putting AI AIG out of business within several days with all these looming questions you might imagine that the market would tank there was expectations that we were going to be seeing another Black Monday like in 1987 by midday Monday it appeared the markets had not Fallen as far as people had anticipated and worried about but this is a broader question Beyond just Wall Street this is a question about Main Street and what happens next we won't know the answers for the next several weeks if not months to come I'm Andrew rorin for the New York Times
European and Asian Markets Plunge For Second Day
VOA News
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the newspapers called it a market in turmoil the worst stock market plunge since 2001 but as investors assessed The Fallout others were speculating about who might be next David Weiss is Chief Economist at standard and pores you've got AIG sitting there you've got uh WAMU sitting there there's a lot of other candidates for the next the next uh person to take a fall after the forced buyout of Maro Lynch and the collapse of Leman Brothers some of the focus has shifted to the world's largest insurance company AIG the American International Group guaranteed many of the mortgages that fuel the housing crisis the company is struggling to stay afloat after its stock tumbled 60% on Monday but with over 100,000 employees worldwide in some 17 million customers analyst Mike Santo says failure is Unthinkable if there's a company that seems too big to outright fail AIG would probably qualify to avoid a market meltdown central banks in Europe Asia and the United States are pumping billions of dollars into their financial systems to ease credit fears stock Trader Howard wien says the crisis marks the end of an era we are entering into the final uh chapter I think of this credit Market crisis that is not to suggest there isn't a lot of worse bad news to come there aren't a lot more shocks uh shocks to come uh but the one factor that we should all be very aware of is that credit will again never be the same as it was was one and two years ago it may also signal the start of more mergers and more Acquisitions Thomas KY is Dean of Economics at New York University I will be surprised if we don't see Morgan Stanley finding a partner and possibly even Goldman Sachs um we see the same kind of contagion spilling over to companies like AIG uh so it it's definitely a very very volatile and and a rather scary time in Wall Street while negotiations continue to sell portions of Leman Brothers assets Investment Bank Goldman Sachs reported third quarter profits declined by 71% milar Sega VA news