Financial Giants Fall Victim to Mortgage Crisis

September 28, 2008

Weighed down by losses in the U.S. mortgage crisis, the stability of major financial institutions continues to be on shaky ground.

On Monday, U.S. investment bank Lehman Brothers Holding Inc. filed for bankruptcy and, on the same day, Bank of America announced that it would be buying struggling Merrill Lynch.

On Tuesday night, the U.S. government’s $85 billion bailout of American International Group, one of the world’s largest insurers, kept the company afloat.

However, no bailout came for Lehman’s, which is the largest casualty, so far, in the past year in the ongoing credit crisis. Lehman filed for bankruptcy on Monday following a failed attempt over the weekend to find a buyer.

Later in the week, Lehman agreed to sell it’s capital markets businesses to a British bank, Barclays, for a lower-than-hoped-for $1.75 billion. Also, Bain Capital and Hellman & Friedman are reportedly in talks with Lehman’s to purchase its investment management unit.

Earlier this week, No.2 U.S. bank giant, Bank of America announced it would be buying Merrill Lynch in a $50 billion deal.

"Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders," Bank of America Chairman and Chief Executive Officer Ken Lewis said in a statement. "Together, our companies are more valuable because of the synergies in our businesses."
 

Posted in Things of Interest