The short story: Lehman Brothers Holdings files for bankruptcy and Bank of America takes over flailing Merrill-Lynch ... a week after the federal government said it would rescue Fannie Mae and Freddie Mac.
Neither presidential candidate statement particularly stands out today ... and neither has made federal deficit reduction (and its unmentioned sibling, the federal debt) a cornerstone of his campaign. Where is Ross Perot when we need him? Oh, right, in this election, he's Ron Paul ... and the Republicans didn't want him raining on their parade so they didn't let him speak in Minneapolis.
Here are the details:
- Monday, 15 September: Bank of America, the nation's largest consumer bank, announced it is acquiring Merrill-Lynch, one of the world's leading wealth management, capital markets and advisory companies.
Charles Merrill founded the company in 1914 and it's No. 30 on the Fortune 500 list. Ironically, Merrill accurately advised customers to "sell" in 1928, just prior to the 1929 banking collapse that triggered the Great Depression.
- Monday, 15 September:
Lehman Brothers Holdings, innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide, declares bankruptcy. The brokerage firm was formed in 1850 in Montgomery, AL.
We can credit Lehman Brothers with post-1929 "innovative financing techniques" and helping kickstart corporate consolidation, beginning with major movie theater chains. A reminder that it is "innovative financing" that has led to today's mortgage crisis.
Read more from our Economics Guide, Kimberly Amadeo: Lehman Brothers Bankruptcy Signals New Bottom for Economy
- Sunday, 7 September: In the largest government-corporate bailout in U.S. history, the federal government takes over Fannie Mae and Freddie Mac
- March 2008: We rescue Bear Stearns.
Stay tuned. I think we are in for a long, rough ride.
Related: What Caused The Great Depression? and The Sub-Prime Mortgage Crisis
Comments
It is pretty bad indeed. Unfortunately, this should have been hurting McCain (after all, the policies of the party he represents are responsible for it), but it does not. Because the American election has nothing to do with rationality. It does not matter who lies more (cf. excellent count from Slate yesterday)… What matters is that American voters find McCain more cosy and Palin more reassuring than the Obama-Biden ticket. If American voters used rationality, there is no way that the McCain-Palin ticket would do more than 25% (the number of people who would actually be better off with them)…
Also, I don’t think that the Merrill-Lynch take over is comparable to the Lehman Bros going belly up. Merrill-Lynch was in trouble, but in no way near to the depth of Lehman. The fact that the higher management of Merrill-Lynch is staying is quite revealing. In other words, Merrill-Lynch’s problems are beyond the norms, while Lehman’s are truly of cataclysmic proportions.
Thanks, Alphast. The worsening situation on Wall Street is yet another indicator that the Ds should win this election, based on history.
You are welcome. I wonder what you think of this? I mean the fact that McCain does not seem to suffer from the bad economic news. I gave my rant in my first comment, but I honestly don’t know the real reason. Is there another effect at play? Like something being credited to McCain that would be more important than the effect of economics?
Alphast, I truly don’t know. I know that last week’s polls showed that the economy had moved to the top of people’s “important” list — and that was before this latest imploding. “It’s the economy stupid” is what helped Clinton win against Bush 41 … so it should help Obama.
However.
I have also read an interesting analysis about the “celebrity” nature of Obama’s candidacy and a theory that he peaked too soon. The Republican (and media0 emotional response to Palin gives some credence to that theory.
If McCain wins this election, we are in trouble. NOT because of McCain, but because of PALIN. McCain is in horrible health condition, a lot worse than he or his campaign lets on.
Bottom Line: McCain is one heart attack/stroke of croaking. And if he does that, everyone has to consider the fact that they are possibly not voting for McCain on Election Day- they are actually voting for PALIN…..Imagine That if you can!!
And I am pretty sure that Reps voters have no problem voting for Palin. It is like voting for a mirror (unlike McCain). I am more concerned (as a European) about the Americans voting for the third time for a militaristic ignorant and trying to rule the world. I know it sounds grotesque, but that is the perception on this side of the ocean. If you guys want to keep more than a couple of your allies, it is time to show that you can elect someone who understands the real problems instead of running after shadows.
If the last 10 days have shown us nothing else, they should have shown us that our days of belligerent militarism are over; we still have checks in our checkbook, but that doesn’t mean we have money in the bank.
Ralph, Ron, & Cynthia:
Now they’re planning the crime of the century
Well what will it be?
Read all about their schemes & adventuring
It’s well worth the fee
So roll up and see
How they rape the universe
How they’ve gone from bad to worse
Who are these men* of lust, greed, & glory?
Rip off the masks & let’s see
But that’s not right, oh no, what’s the story?
There’s you & there’s me
That can’t be right