ID :
19598
Mon, 09/15/2008 - 19:35
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http://m.oananews.org//node/19598
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Global markets in turmoil as Lehman faces bankruptcy by Dharam Shourie
New York, Sep 15 (PTI) A series of events in United States, including Bank of America agreeing to buy Merrill Lynch for 44 billion dollars and Lehman Brothers' move to file a bankruptcy protection, has shaken up the global financial markets.
About 10 major banks, comprising Citigroup and Credit Suisse Group, reached an agreement to create a 70 billion dollars borrowing facility committing their own money, which could be used to tide over the financial crisis.
Lehman Brothers thought of bankruptcy after it failed to find a buyer and financial media reports said that AIG could survive for only a few days without infusion of the capital.
The giants of financial markets have been shaken up by losses of hundreds of billions of dollars in bad mortgages in the housing markets.
Lehman Brothers began considering bankruptcy after Barclays and Bank of America, the top suitors, walked away apparently following Federal authorities declining to provide financial backup to them, declaring bankruptcy would allow Lehman's subsidiaries to continue to function as the company itself is wound down.
"The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence," the New York Times said.
Though the Federal Reserve steered clear of bailout of Lehman, the Wall Street Journal said it is expected to take new steps to stabilise the broader financial system.
These steps, expected to be temporary, would make it easier for banks and securities firms to borrow from the central bank by using a wider range of collateral.
Bankers say these financial institutions might need short-term funds as they unwind their many trading positions with Lehman.
Merrill has some 60,000 employees and Lehman 25,000. It was not clear how the moves would affect them.
AIG executives were reported to be trying to raise funds by selling assets or infusion of capital from private equity firms.
But late Sunday night, the New York Times reported quoting a person briefed on the matter that the insurance giant was seeking a 40 billion dollar bridge loan from the Federal Reserve as a potential downgrade of its credit rating could spell doom.
Ratings agencies threatened to downgrade the insurance giant's credit rating by Monday morning, allowing counter-parties to withdraw capital from their contracts with the company, the paper said.
It quoted one person close to the firm as saying that if such an event occurred, AIG may survive for only 48 hours to 72 hours.
As the crisis intensified, Mayor Michael Bloomberg, himself a billionaire, cancelled his visit to California to meet governor Arnold Schwarzenegger and instead was talking to officials and experts to determine the impact of the developments on the city.
About 10 major banks, comprising Citigroup and Credit Suisse Group, reached an agreement to create a 70 billion dollars borrowing facility committing their own money, which could be used to tide over the financial crisis.
Lehman Brothers thought of bankruptcy after it failed to find a buyer and financial media reports said that AIG could survive for only a few days without infusion of the capital.
The giants of financial markets have been shaken up by losses of hundreds of billions of dollars in bad mortgages in the housing markets.
Lehman Brothers began considering bankruptcy after Barclays and Bank of America, the top suitors, walked away apparently following Federal authorities declining to provide financial backup to them, declaring bankruptcy would allow Lehman's subsidiaries to continue to function as the company itself is wound down.
"The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence," the New York Times said.
Though the Federal Reserve steered clear of bailout of Lehman, the Wall Street Journal said it is expected to take new steps to stabilise the broader financial system.
These steps, expected to be temporary, would make it easier for banks and securities firms to borrow from the central bank by using a wider range of collateral.
Bankers say these financial institutions might need short-term funds as they unwind their many trading positions with Lehman.
Merrill has some 60,000 employees and Lehman 25,000. It was not clear how the moves would affect them.
AIG executives were reported to be trying to raise funds by selling assets or infusion of capital from private equity firms.
But late Sunday night, the New York Times reported quoting a person briefed on the matter that the insurance giant was seeking a 40 billion dollar bridge loan from the Federal Reserve as a potential downgrade of its credit rating could spell doom.
Ratings agencies threatened to downgrade the insurance giant's credit rating by Monday morning, allowing counter-parties to withdraw capital from their contracts with the company, the paper said.
It quoted one person close to the firm as saying that if such an event occurred, AIG may survive for only 48 hours to 72 hours.
As the crisis intensified, Mayor Michael Bloomberg, himself a billionaire, cancelled his visit to California to meet governor Arnold Schwarzenegger and instead was talking to officials and experts to determine the impact of the developments on the city.
