Today was one of Wall Steets biggest days ever.....A Sunday 09-14-08

[Vedubin01]

In one of the most dramatic days in Wall Street's history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, hurtled toward liquidation after it failed to find a buyer, people briefed on the deals said.


The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of tens of billions of dollars in losses because of bad mortgage finance and real estate investments.

A good read.....

[kronus]

Yeeah... it's not going to be pretty in the stock market tomorrow. AIG is also pretty close to bankruptcy.

[Joey Link]

Don't worry, Obama will fix it.

[kronus]

Don't worry, Obama will fix it.

Don't worry, McCain will fix it better.

[Vedubin01]

its not a governmental issue, and no president short of God himself could fix this.

[JPL]

screw both of you guys. both of those candidates are socialists. pick any libertarian and watch your wallet grow along with the economy. i'm ready for some anarchy

[kronus]

vedubin - Exactly. Bringing politics into this is pointless. This isn't about politics.

It may be stupid, but I'm going to withdraw as much as I can out of my checking account tomorrow until I see which way this goes.

[Vedubin01]

screw both of you guys. both of those candidates are socialists. pick any libertarian and watch your wallet grow along with the economy. i'm ready for some anarchy

HAHA good luck, you cant own cool guns in California! :)

[Jand3rson]

Keep the political bickering out of this thread, or I'll shit-can it just like the rest of them. It's got nothing to do with it.

[Vedubin01]

Keep the political bickering out of this thread, or I'll shit-can it just like the rest of them. It's got nothing to do with it.

Thanks this was not to be one of those posts! This effects everyone in their 401ks and possibly their jobs in the AM!

[Jon325i]

With all the financial you-know-what hitting the fan over the weekend, I'm not exactly looking forward to seeing how Wall Street reacts tomorrow when activity on the trading floor begins. It has the potential to get really ugly before lunchtime.

Hang on to your seats!

[Hallen]

In one of the most dramatic days in Wall Street's history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, hurtled toward liquidation after it failed to find a buyer, people briefed on the deals said.


The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of tens of billions of dollars in losses because of bad mortgage finance and real estate investments.

A good read.....

Good. The government is not involved. This may be very, very painful for the employees and some customers, but it is also a big, big warning to other investment banks. Uncle Sam is not your bailout system. Responsible banking and responsible investments are key. Hopefully, some investors will also learn from this and quit going after huge rates of returns in a short period. There is always big risks with that kind of thing. Some people don't learn until they are burned, unfortunately.

I hope this is actually a positive thing for the market and this is the first step towards a real recovery. People have to realize that there were need for these investment banks previously, there will be need of the same or more capacity soon. So BoA is going to be making lots of money, and the rest of the investment banks who make it through this will also be sucking up new clients. Of course if people do make runs on the banks, then we could be in for some serious troubles.

Just a small note on a small part of banking. All banks today use fractional reserves. They can all loan out approximately 88%( I think that is the right number) of the assets they have to include money in short term accounts (like your checking account... which is why you can get free checking now). That means that at any given time, the bank has 12% of the money that has been deposited in the bank. They can't possibly pay out all the money to all their customers. It would break the bank. It does also get worse. Because they loan out 88% of the money they have, most of that money gets deposited in other banks. Guess what they do? They loan out 88% of it. Which gets deposited in other banks, who then loan out 88% of it. And so on and so on... So, one run on one bank by ignorant people, and then we would have a huge, huge problem. The Fed insures your deposits (for better or worse). Don't be stupid and think you should go down and withdraw all your money. That will just make matters worse. In the short term, you may have your cash, but in the long term, you probably won't be making any more because everything just collapsed.

[Vedubin01]

good write Hallen,

you are correct on your number if I recall correctly. If you are with a bank that is FDIC insured then your account is backed with the Government up to 100k. But will not be handed to you the moment your bank folds. Its a pain in the ass and you stand in line to collect what money they think you have. Record keeping is very important.

This is a good thing for the long term. The old adage that shit always surfaces is true to this. Hiring and firing policies really need to be changed in this country. All jobs should be goal and performance based. Many jobs today your protected via union or just how a business operates. If one of my employees doesn't do what they are suppose to, it docked right out of their paycheck. And if they make a decision that cost my company money with out having approval, its taken out of their paycheck till its paid off or they walk the minute I find out. Government jobs are the worst for protecting employees that have been there longer than their 90 days. To me its the bottom line numbers and customer service.

[kronus]

Just a small note on a small part of banking. All banks today use fractional reserves. They can all loan out approximately 88%( I think that is the right number) of the assets they have to include money in short term accounts (like your checking account... which is why you can get free checking now). That means that at any given time, the bank has 12% of the money that has been deposited in the bank. They can't possibly pay out all the money to all their customers. It would break the bank. It does also get worse. Because they loan out 88% of the money they have, most of that money gets deposited in other banks. Guess what they do? They loan out 88% of it. Which gets deposited in other banks, who then loan out 88% of it. And so on and so on... So, one run on one bank by ignorant people, and then we would have a huge, huge problem. The Fed insures your deposits (for better or worse). Don't be stupid and think you should go down and withdraw all your money. That will just make matters worse. In the short term, you may have your cash, but in the long term, you probably won't be making any more because everything just collapsed.

Very good points, thanks for explaining how this all works.

I know that withdrawing ALL of my checking account is a stupid idea, I just want some cold hard cash to feed myself with if shit goes down. Being a poor college student, I don't really have any assets I can readily get rid of.

[DSP74]

Is it possible instead of them being blamed for poor mortgage loan choices, it simply a matter of those people who took out mortgages are affected by loss of jobs, and cost of living to the point that they simply can't make payments.........Multiplied by the thousands and thousands of people in the same boat.