Tuesday, September 16, 2008...
NEW YORK: Lehman Brothers declared itself bankrupt Monday and Wall Street rival Merrill Lynch had to be taken over in a new financial earthquake that sent global markets into a slump and panicked central banks.
The US Federal Reserve, European Central Bank and Bank of England injected tens of billions of dollars into money markets after the fall of the finance titans under the weight of the massive financing of bad loans.
Lehman Brothers filed for bankruptcy on Monday after a frantic weekend of negotiations failed to arrange a rescue.
In the fallout, Bank of America took over Merrill Lynch in a 50 billion dollar deal, insurance giant AIG was reported to have sought a massive emergency loan to head off its own crisis and a group of banks set up a 70-billion-dollar global emergency fund.
"You've probably seen more in one day of financial history than we've seen since the great crash of 1929," Macquarie Private Wealth associate director Marcus Droga said.
"I'm not suggesting the US market will crash tonight, but in terms of landmark events, it's an historic day," Droga told media.
Despite reassurance from central banks, European and Asian stocks plunged by three to five percent, the dollar fell and oil lost another four dollars to 92.84 dollars a barrel over fears for the international economy.
The Federal Reserve eased conditions for collateral in return for the provision of funds to banks and said it was working "to identify potential market vulnerabilities."
The European Central Bank said it injected 30 billion euros (43 billion dollars) into money markets to keep them going after the Lehman collapse.
The Bank of England injected 5.0 billion pounds (6.3 billion euros/9.0 billion dollars) into short-term money markets.
"It seems clear that a category five storm is making landfall in the US financial system and a lot of very messy stuff is hitting the fan," Michael Panzer, author of the book "Financial Armageddon," said on his blog.
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