General Question

allengreen's avatar

Are we witnessing a classic "house-of-cards" regarding Bank Failures?

Asked by allengreen (1631points) September 15th, 2008

Is this just a bump in the road, and we see no effects in our day to day life and business? Or will the death of Lehman Brothers and Merrill Lynch be the beginning of a wide spread collapse?

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6 Answers

EmpressPixie's avatar

The whole thing kind of scares me, but in the nature of being fair, Lehman died. Merrill was acquired. AIG…

gooch's avatar

No it will be fine give it time to rebound. Some people will even make money on this deal just watch.

bpeoples's avatar

Lehman and Merrill Lynch aren’t the beginning—they’re probably the 75% mark on this crisis. Countrywide, Fanny Mae, Freddie Mac, and various other companies have already hit or made it through their crises. BofA seems to be coming off very well in this, and honestly it looks to me like things are starting to stabilize.

I’d guess we have one or two more bank failures/acquisitions to go before we’re done.

allengreen's avatar

Pollyannish answer’s, guess nobody’s paying attention. Gooch—share with us who is making money and how? and don’t say shorts, cause that’s bs.

Merrill was a forced sale—does anyone understand what is a “run on banks”.

bpeoples—we are in the third inning of a nine inning game, but we will hear from the “Bubble Heads” that we have reached a bottom, though it is a false bottom. So far 285 national institutions have failed (more than that actually)—the largest, Fannie and FReddie added $5 Trillion dollars in liability to our national obligations.

This has been an interesting talking of the pulse—don’t feel bad, most folks don’t follow this until the credit card gets turned off or the atm does not dispense money.

ht1979's avatar

Let me preface this by saying that I have a BA in economics, but I tend to be more cynical about these things than most.

While I think most of the major name-brand bank failures are behind us, we’re not out of the woods. There are tons of smaller banks and other components of our economy that will likely struggle and, in many cases, perish. I think we’re teetering on the edge of a prolonged recession. With that comes additional job losses and flat wages. We’re also facing inflation (as a result of keeping our interest rates unnaturally low to stem the mortgage crisis coupled with rising oil and food costs). I’m worried that the combination of job losses, flat wages, and inflation (rising prices) will precipitate a crisis in the prime portions of the mortgage market. This is when the real trouble starts as even banks that were intelligent about their lending practices will be hit (whereas the subprime mortgage crisis can definitely be attributed to naive lending practices on the parts of banks and lending institutions)... Hopefully I’m completely and totally wrong, but I think we’re just dog paddling right now trying to delay the inevitable economic realities that we should be facing. :S I don’t envy the job our next president will have – it’ll be next to impossible to right this ship in the short term (and blame will fall squarely on his shoulders when/if we sink deeper).

Sorry for being debbie downer on this.

allengreen's avatar

GA, HT——you ARE paying attention. Were there more folks like you, we would not be in this situation.

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