Wall Street meltdown continues......
Good news all around obviously.
With the government unwilling to guarantee another investment bank bailout, Bank of America and Barclays PLC withdrew their bids to buy Lehman, and now we have the largest bankruptcy filing in history.
How big is it? For some perspective, Lehman had $639 billion in assets. Enron and Worldcom (remember them?) had $207 billion in assets COMBINED!
Read more at Lehman Brothers files for Chapter 11 protection.
How will this impact you (and the real estate market in Boston)?
Other than the huge hit your stock portfolio is taking today, the effects will be tough to judge for a while. The financial industry is certainly going through a tumultuous and painful period. The question is, will all the waves trickle down and disrupt the rest of the economy and the real estate market. With the complexity of the financial markets, nobody really can say what the lasting impact on the economy will be yet.
These massive shifts in the financial industry came together during an extraordinary series of meetings over the weekend at the Federal Reserve Bank of New York. They included senior executives of every major Wall Street firm as well as officials from the Fed, Treasury Department, and Securities and Exchange Commission. Participants described the meetings as hectic and unpredictable, with at least two big deals to buy Lehman coming together and falling apart in a matter of hours. Problems at Washington Mutual, the nation's largest thrift, as well as major flaws in the architecture of the financial markets, were also discussed.
Tying the troubles together at all of the firms in attendance were the mortgage bonds that financed homeownership for millions of Americans during the housing boom over the past several years. The biggest Wall Street banks, more than any other type of financial firm, rushed into this profitable business with few foreseeing the far-reaching effects of a real estate crash. Now it is clear that the losses from these bonds can take down giants.
The financial sector makes up a large portion of Boston's economy, so I would expect us to be in for a bit of a wild ride a little longer...
