Find your truth

Monday, September 15, 2008

Lehman Bros files for bankruptcy, Merrill Lynch taken over

Lehman Brothers, the fourth-largest US investment bank, has filed for bankruptcy protection, dealing a blow to the fragile global financial system. The news led to sharp falls in share prices around the world, and officials took measures to reassure markets. Lehman had incurred losses of billions of dollars in the US mortgage market.
Merrill Lynch, also stung by the credit crunch, has agreed to be taken over by Bank of America, the latest twist in a dramatic turn of events on Wall Street. US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right

Lehman Bros headquarters at Manhattan

now as we work off some of the past excesses". Paulson upbeat despite turmoil but he added: "The American people can remain confident in the soundness and resilience of our financial system." However he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead before the market was corrected.

Turmoil would continue in financial markets until the housing correction was completed, he added. Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets". But he gave no details of what such steps might mean.
Earlier in the day President George W Bush said: "In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments."
'Extraordinary 24 hours'
Separately, Bank of America said it had agreed to buy investment bank Merrill Lynch for $50bn (£28bn), in a deal that will create the world's largest financial services company. Three of the top five US investment banks have now fallen victim to the credit crunch. Lehman and Merrill join Bear Stearns, which was sold to JP Morgan for a knockdown price in March.
The BBC's business editor, Robert Peston, said that it had been Wall Street's most extraordinary 24 hours since the late 1920s. He said that Merrill's sale was almost as shocking as Lehman's demise. "The global financial economy has never in recent years been tested by quite such a combination of accidents and jolts to confidence," he said.


Post a Comment

<< Home