In the news: Lehman Brothers filed for Chapter 11; Bank of America is acquiring Merrill Lynch for $50 Billion; AIG seeks fresh capital to the tune of $75 Billion to shore up liquidity as its stock tumble more than 60%; Buckle up! Financial ride getting even rougher.
Guess you felt dizzy for a while. Don’t worry, ‘felt the same thing too. The layman brothers (me included) are quite dumbfounded on the news that hit the wires this morning. I know the news is big, but can someone please explain it in plain English? I promise I won’t sleep. The news again (in plain English):
Lehman Brothers - a big, wait, make it huge, sorry, GIANT – investment bank in the US has filed for bankcruptcy and will cease operations effective immediately. This company used to have a value of $47 Billion and has about 25,000 employees worldwide. Now, bye bye to all of that.
Merrill Lynch is another GIANT, no, make it GARGANTUAN investment bank that is now being acquired by Bank of America to the tune of $50 Billion. That’s dirt cheap compared to Merrill’s actual value during its heydays. Think getting Ferrari for the price of Nissan. Well, Merrill lost much of its value over the past few months so the company is still considered lucky because another company acquired them. I’m not sure though what will happen to its more than 50,000 employees globally.
AIG is another GARGANTUAN, no make it MASSIVELY GARGANTUAN insurance company that is seeking fresh capital (read: cash) to ensure it stays in the game. At its peak, AIG was valued at $190 Billion and was ranked among the world’s five biggest financial companies. Now, AIG’s value shrunk 93%. The world is praying that this massively gargantuan company doesn’t follow Lehman or Merrill’s fate.
What’s the reason behind all of these you ask? It has something to do with the housing crisis in US. It’s a very complex issue but in a nutshell, it’s about people who borrowed money and not been able to pay it back.
These news are pretty scary and I hope proper measures can be done to mitigate its impact. The world’s biggest economy – United States – must be able to withstand this latest financial hurricane, otherwise, the rest of the world will be equally and severely battered.
Guess you felt dizzy for a while. Don’t worry, ‘felt the same thing too. The layman brothers (me included) are quite dumbfounded on the news that hit the wires this morning. I know the news is big, but can someone please explain it in plain English? I promise I won’t sleep. The news again (in plain English):
Lehman Brothers - a big, wait, make it huge, sorry, GIANT – investment bank in the US has filed for bankcruptcy and will cease operations effective immediately. This company used to have a value of $47 Billion and has about 25,000 employees worldwide. Now, bye bye to all of that.
Merrill Lynch is another GIANT, no, make it GARGANTUAN investment bank that is now being acquired by Bank of America to the tune of $50 Billion. That’s dirt cheap compared to Merrill’s actual value during its heydays. Think getting Ferrari for the price of Nissan. Well, Merrill lost much of its value over the past few months so the company is still considered lucky because another company acquired them. I’m not sure though what will happen to its more than 50,000 employees globally.
AIG is another GARGANTUAN, no make it MASSIVELY GARGANTUAN insurance company that is seeking fresh capital (read: cash) to ensure it stays in the game. At its peak, AIG was valued at $190 Billion and was ranked among the world’s five biggest financial companies. Now, AIG’s value shrunk 93%. The world is praying that this massively gargantuan company doesn’t follow Lehman or Merrill’s fate.
What’s the reason behind all of these you ask? It has something to do with the housing crisis in US. It’s a very complex issue but in a nutshell, it’s about people who borrowed money and not been able to pay it back.
These news are pretty scary and I hope proper measures can be done to mitigate its impact. The world’s biggest economy – United States – must be able to withstand this latest financial hurricane, otherwise, the rest of the world will be equally and severely battered.
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