c.o.L.D.F.i.s.H : September 2008
Thursday, September 18, 2008
Wow….

Over the past two weeks, officials have intervened on behalf of three giant financial firms - mortgage financiers Fannie Mae and Freddie Mac and insurer AIG.

Meanwhile, in a nod to so-called moral hazard - the notion that bailouts only lead to greater risk-taking by those who think they'll be saved - the government let brokerage firm Lehman Brothers collapse on September 15th 2008, leaving its investors with heavy losses.

Officials point to Lehman and the near wipeout of shareholders at Fannie, Freddie and AIG as evidence that the government won't write investors a blank check.

By today, September 18th 2008, Morgan Stanley and Paulson's Alma mater, Goldman Sachs Wall Street's two remaining independent investment banks struggling to raise the money they need to muddle through the credit crunch. Morgan fell as much as 38% to a 52-week low and Goldman slid 25%, dropping below $100 a share for the first time in three years. The falling share prices are more than a spectacle: If investors lack confidence and financial firms can't raise cash, lending to businesses and consumers could further decline, dealing another blow to an already weak economy.

What's followed has been a free fall in shares across the financial sector - first at Lehman but subsequently at AIG and Washington Mutual and lately at Goldman and Morgan Stanley - that has had the effect of preventing these companies from raising new equity.

Though neither Goldman nor Morgan Stanley has shown signs of the decline visible at Lehman or AIG, it's also true that six months ago few thought Lehman, with liberal access to government loan facilities, would follow in the footsteps of Bear Stearns.

Source: cnnmoney
posted by Cha-- @ 8:47 AM