There's more financial news this Sunday night than on most weekdays.

[randomness]

Lehman Brothers looks like it's going to file for bankruptcy tonight.

Merrill Lynch is selling itself to Bank of America to avoid a similar fate.

American International Group has asked the Federal Reserve for a $40 billion loan.

It's the phase of the moon! :) Or the phase of the business cycle, anyway.

Comments

[xse99.livejournal.com]

does this have to do with the fact that it's Monday morning already in the Asian markets?

[spatch]

Whoa.

ML is one of my company's clients. They had a whole buncha bigwigs show up last week for an on-site visit. Nobody really knew what it was all about but there was a clear sense of Big Tension among all the higher-ups. I wonder if they were actually BoA types evaluating us to determine whether or not to remain a client.

Again, I say unto thee, whoa.

[r-ness.livejournal.com]

I don't think it is, this time. Monday is a holiday in Japan, for one thing.

Last time, with Freddie and Fannie, it definitely was. That announcement was timed so that it happened before Asian market open, in large part because so much of their paper was in Asian hands.

[r-ness.livejournal.com]

Maaaaybe. :)

Actually, you should check out bankrate.com's rating site: http://www.bankrate.com/brm/safesound/ss_home.asp
They only update quarterly, and as we've seen, three months is a long time. But it's something.

[st-rev.livejournal.com]

I thought for a minute that your icon was a young Noam Chomsky. Imagine my relief when I figured out who it really was!

[tcb.livejournal.com]

da-yum!

[evilmagnus]

Huh. Didn't see the ML thing coming; I wonder how BofA's going to justify that stock price, given their previous dilution with Countrywide (and all those yummy mortgages they inherited). I guess they're counting on becoming Too Big To Fail (tm).

[hammercock.livejournal.com]

You know, I really hate this feeling that we are witnessing the twilight of this nation.

[spatch]

It's the smugness, isn't it? Very confusable indeed.

[digitalemur.livejournal.com]

I blame this post for the lengthy dream I had last night that my mother's farm mortgage had magically converted into a variable-rate mortage that had a new interest cap at 30% and was expected to reach that cap some time in the next year.

And yes, I thought "they can't do that!" even in the dream.

[meepodeekin.livejournal.com]

So...should an ordinary schlub be worrying about their money? I checked out the link you recommended above, and both my bank and my credit union were rated 3. Interpreting that is harder for me.

Also, do you have any links or recommended reading on the mathematical side of all this? I'd like to give a presentation on this stuff for our math students, but it has to have some actual math in it...

[r-ness.livejournal.com]

Oh, this was just the financial system. :)

[r-ness.livejournal.com]

At least it's a plan...

[r-ness.livejournal.com]

Assuming you have less than $100,000 each in that bank and in that credit union, and that they're both Federally insured, you should only have to worry about how soon it takes for the FDIC to get money to you, even in the extreme case of both going bust.

I don't actually have any links on the math. I try really hard not to invest in anything I don't understand. I agree that it would make a great presentation, though. You'll probably want to talk to someone in the econ or finance departments about that.

I'm interested in hearing the presentation and I'm sorry I can't help. :(

[r-ness.livejournal.com]

Good thing they can't, eh?

(Please don't blame the messenger. :) )

[meepodeekin.livejournal.com]

No problem. But now I have to go be responsible and do actual research...

I am going to start with basics like how to amortize a given principle amount at a given interest rate and such, but I'd like to get into how mortgage-based instruments were created and how they were rated and such...it is extremely interesting and timely but a bit further out of my comfort zone than I would like.

We have waaay less than $100,000 but some doom-mongers are predicting a run on the FDIC. Should I be concerned?

[stolen-tea.livejournal.com]

3 down, 2 to go? I guess Morgan Stanley is the only one that hasn't had a serious effect yet...

[r-ness.livejournal.com]

It's true that if WaMu goes bust, the FDIC will likely run through its $45 billion deposit insurance fund paying out deposits they've guaranteed.

But if the FDIC runs out of money, they just fall back on the $70 billion credit line they have with the Treasury. If they look like they're going to run through that, the Treasury can raise the FDIC's credit line. And, of course, the Treasury cannot run out of dollars, as they can simply inflate their way out of the problem by issuing more debt. Ultimately, this becomes a problem, but it does backstop the deposit institutions. (Well, I suppose they could raise taxes. Stop laughing. :) )

Given the choice between a bank panic and inflation, the precedent is that the government will go with inflation. Arguably, this is even the right choice. In any case, it's fairly clear that they'll hand you back your money and keep their promise, even if they have to print it just for you.

I'm sure that's reassuring.

[r-ness.livejournal.com]

Say, I did find this, which while not particularly mathematical does outline some problems with the sorts of derivatives that were being constructed, way back in '99:

http://www.derivativesstrategy.com/magazine/archive/1999/0899qa.asp

[r-ness.livejournal.com]

Oh, and while I'm at it, here's the Q&A referenced in the above link:

http://www.derivativesstrategy.com/magazine/archive/1997/1296qa.asp

[r-ness.livejournal.com]

And Goldman reports later today (Tuesday).

[meepodeekin.livejournal.com]

Yep, thanks. I feel waaay better now. :)

And thanks for the links.

[amelia-g.livejournal.com]

I'd like to say this is not keeping me up at night, but that would be inaccurate. We live in interesting times.

[choirsoftheeye.livejournal.com]

Oh out of control boom-bust cycles in a deregulated market! You are so awesome!