*It Is Not Just Lehman Brothers - or Lehman and WaMu.*
Apparently, bankers involved in the enormous talks to save Lehman Brothers are saying that the internal work of at least one firm indicates a non-zero probability that Washington Mutual, AIG Insurance and Merrill Lynch could fold WITHIN THE WEEK - individually or separately. As for the dependability of this work, I can only say that the same firm, analyzing the effect of Bear Stearns, reportedly concluded that if that investment bank had not been rescued, Lehman Brothers would follow Bear into bankruptcy within a short time, followed by Merrill. This was considered too dour a forecast by many at the time. Apparently it wasn't gloomy enough.
Jim Cramer may soon get an answer to his question: "When Will This Market Crack?"<http://link.brightcove.com/services/link/bcpid1078966384/bclid1111461880/bctid1790967178>
The problem with going further into a story like this is that - for the moment - the internal finances of these institutions and the operations of the markets in which their assets are valued are too murky to make analyses - unless you have proprietary knowledge, which I sure don't.
As for my own little thesis, this is probably going to be a negative both for oil and the dollar, but it's not good for the euro or yen in the long term, either, I think. But certainly in the short-term the euro is soaring. I expected it, see my previous post "It Begins".
And that bubble full of dollars is sure emptying out pretty fast. I think all trends pause and then accelerate.
On a positive note, I just want to say that this is a very predictable result of laissez-faire policies, but it CAN BE REVERSED.
First, the U.S. government has enormous power to re-capitalize markets because the government's capital efficiency is so strong.
While under-regulation in trading markets always - ALWAYS - leads to collapse [start with this mess, then go backwards in time through Enron, LTCM, Asian Bubble, etc., etc. - you'll see what I mean], those markets usually get properly regulated and start to function again - with some significant help.
As a citizen, you just need to support policies that put money out to more regular people in a well-organized, well-regulated way with the most democratic input.
-- peace,
boddi
http://financialroadtosocialism.blogspot.com/