27-09-2008, 03:08 AM
Defaulting banks - where will it stop?
Will it stop at all?
The shock news today that Wall Street giant Lehman Brothers have filed for Chapter 11 bankruptcy, has left world banking community dazed. It took less than a week for the market to bring this giant to its knees. The whisperers in the market repeat the word catastrophe.
Urgent, if not desperate discussions resulted in the announcement that Merrill Lynch is to be taken over by Bank of America. The fact though, is that this is less of a takeover and more of a vital rescue package.
Next in line are AIG and Morgan Stanley. CD trading in the latter opened today with a spread of 120 basis points, a sure sign of imminent danger. Meanwhile it is reported that AIG have knocked on the door of the Fed seeking an urgent infusion of $40 billion (although the figure I have heard is $50 billion).
Rating agencies like Standard & Poors and Moody are a spent force. From a vantage point of credit rating supremacy a decade ago, to today when no one in their right minds takes the slightest notice of their wacky self congratulating analysis.
And so decades of unadulterated greed, weak oversight an other dysfunctions are finally coming home to roost. I say this not with glee but with sadness for the tens of thousands of families who will suffer from sudden unemployment at the worst possible time in the last 80 years (members of my own family are hanging on a knife-edge, in fact).
But this, as bad as it is, is still a long way short of what market insiders regard as the true bubbling danger that faces the community of world bankers. Thee collapse of the US banking industry could trigger a complete loss of confidence in the dollar. And the sad fat is that the only ting holding the dollar is confidence. There is not a spanner of tinkering screwdriver left in the toolbox for the authorities to grasp hold of. They have all been used already.
And if the dollar goes...
Will it stop at all?
The shock news today that Wall Street giant Lehman Brothers have filed for Chapter 11 bankruptcy, has left world banking community dazed. It took less than a week for the market to bring this giant to its knees. The whisperers in the market repeat the word catastrophe.
Urgent, if not desperate discussions resulted in the announcement that Merrill Lynch is to be taken over by Bank of America. The fact though, is that this is less of a takeover and more of a vital rescue package.
Next in line are AIG and Morgan Stanley. CD trading in the latter opened today with a spread of 120 basis points, a sure sign of imminent danger. Meanwhile it is reported that AIG have knocked on the door of the Fed seeking an urgent infusion of $40 billion (although the figure I have heard is $50 billion).
Rating agencies like Standard & Poors and Moody are a spent force. From a vantage point of credit rating supremacy a decade ago, to today when no one in their right minds takes the slightest notice of their wacky self congratulating analysis.
And so decades of unadulterated greed, weak oversight an other dysfunctions are finally coming home to roost. I say this not with glee but with sadness for the tens of thousands of families who will suffer from sudden unemployment at the worst possible time in the last 80 years (members of my own family are hanging on a knife-edge, in fact).
But this, as bad as it is, is still a long way short of what market insiders regard as the true bubbling danger that faces the community of world bankers. Thee collapse of the US banking industry could trigger a complete loss of confidence in the dollar. And the sad fat is that the only ting holding the dollar is confidence. There is not a spanner of tinkering screwdriver left in the toolbox for the authorities to grasp hold of. They have all been used already.
And if the dollar goes...