News

Global Markets Tumble as Major US Bank Fails and Brokerage is Sold

World equity markets tumbled Monday as Lehman Brothers, a major U.S. investment bank, sought protection from its creditors and Merrill Lynch, America's biggest brokerage, was acquired by Bank of America. VOA's Barry Wood reports that the Dow Industrials lost more than 500 points, or 4.5 percent of their value.

It was a tumultuous day on Wall Street as Lehman Brothers failed to find a merger partner and sought protection under the U.S. bankruptcy laws. The New York firm employs 25,000 people worldwide. Analysts say its shareholders will likely be wiped out and its bondholders could receive only 60 percent on their investment.

The end for Lehman came after three days of meetings chaired by the U.S. Treasury and the Federal Reserve, the U.S. central bank, failed to find a merger partner for the firm. In recent months, Lehman Brothers had been hammered by losses triggered by the weak U.S. housing market.

Treasury Secretary Henry Paulson said the government was unwilling to commit taxpayer money to rescue Lehman as it had with its rival Bear Stearns six months earlier.

Analyst Peter Wallison of the American Enterprise Institute here in Washington applauds the government's refusal to bail out Lehman.

"If Bear had been allowed to fail [in March 2008], the psychological effect on the market would have been enormous and there might have been runs on those institutions," said Peter Wallison. "The difference with Lehman today, in my view, is that there is a lot more confidence in those institutions now."

Meredith Whitney, a securities analyst at Oppenheimer in New York, says the 13-month-long credit crisis is not yet over. She warns that Lehman's collapse could pull huge amounts of money out of the world economy.

"This is traumatic across the globe," said Meredith Whitney. "Most importantly, it pulls liquidity out of the global economy. So, to date, $3 trillion less liquidity is flowing through the market than it did last year."

Whitney says the trauma on Wall Street will slow economic activity worldwide.

The shares of U.S. major financial institutions were down sharply on Monday. The decline on Wall Street was more than four percent, with the Dow Jones Industrials registering their biggest daily decline since the September 11, 2001 terrorist attacks.

European markets were down about 3.5 percent. Oil prices also tumbled on the expectation of economic slowdown and reduced demand for petroleum. Oil traded at less than $100 a barrel for the first time since March. The price of oil has retreated 30 percent from its July high.

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs