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And The Sky is Falling, Too

It’s an entirely new financial world out there today -- in a single weekend, Wall Street has turned upside down. As The Washington Post explained, two of the

Jul 31, 20203.2K Shares541.7K Views
It’s an entirely new financial world out there today — in a single weekend, Wall Street has turned upside down.
As The Washington Post explained, two of the world’s biggest investment banks are basically about to disappear, with Lehman Bros. filing for bankruptcy and Merrill Lynch being bought by Bank of America. Once the shock of all this settles today — and the markets begin to react — questions will begin anew about whether the Federal Reserve should have stepped in here, the way it did to rescue Bear Stearns in March.
But if today’s news isn’t unsettling enough, consider this possibility. Maybe the Fed didn’t step in because it couldn’t. Yes, the Fed decided over the weekend to loosen its lending practices a bit, to keep cash flowing. But that’s all.
But, maybe the Fed is, as they say, out of powder. Maybe it decided the government no longer has endless pockets to rescue failing banks — even those as big and venerable as Lehman Bros. and Merrill Lynch. Maybe there’s no backstop anymore.
Whatever the reason for the Fed’s decision, it’s clear Wall Street is on its own now. Keep your eye on the markets today; it should be a bumpy ride.
Hajra Shannon

Hajra Shannon

Reviewer
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