Lehman Brothers, burdened by $60 billion in soured real-estate holdings, said it is filing for Chapter 11 bankruptcy after attempts to rescue the 158-year-old firm failed.
Bank of America Corp. said it is snapping up Merrill Lynch & Co. Inc. in a $50 billion all-stock transaction.
The demise of the independent Wall Street institutions came as shock waves from the 14-month-old credit crisis roiled the U.S. financial system six months after the collapse of Bear Stearns. . . .
Insurer AIG, hit hard by deterioration in the credit markets, said Sunday it is reviewing its operations and discussing possible options with outside parties to improve its business after a week when its stock dropped 45 percent amid concerns about the company's financial underpinnings.
The Wall Street Journal and The New York Times both reported early Monday on their Web sites that the American International Group is seeking an additional $40 billion in emergency funds - possibly from the Federal Reserve - to help it avoid a credit rating downgrade, which would make it more expensive for AIG to raise money.
I discussed some underlying causes of these developments last week.
Lehman dealt a blow to the largest of Janus Funds mutual funds, based in Denver, Colorado's Cherry Creek North business district (walking distance from Wash Park). While this doesn't directly hurt Janus, because mutual funds are fundamentally investments made with someone else's money, it hurts their carefully cultivated reputation for careful research and prescience. This could discourage others from investing with Janus in the future, and in particular hurts the reputations and job security of the fund managers at the fund that made the bad bet.
Denver itself, however, has one of the best credit ratings in the nation due, according to the S&P which made the rating, to:
the fundamental strength of Denver’s deep and diverse economy and high per capita market values, combined with the city’s proactive budget-cutting efforts in periods of revenue softness to maintain, in our opinion, very strong fund balance..
Commercial bank Washington Mutual is also in dire straights and has ousted its CEO.