Sep
As much as I hate to state it as an informed citizen, I have no idea what's going on with the entire wall street war right now.
can anyone explain to me why lehman brothers and merryl lynch went out the way they did and how this situation all ties to the american economy?
Answer:
If you read the transcript of Bush's speech tonight, that's a very brief but accurate summary. I'm really fatigued to explaining it, it's pretty complicated so I don't really want to type it again.
Basically a bunch of banks made risky loans, now people aren't paying them back because their houses are declining in price and the interest rates on their loans have gone through the roof.
Lehman, Fannie Mae and Freddie Mac, Bear Stearns, and AIG have all failed or almost failed because of loses on securities based on these mortgages. These loses and the lack of trust between financial institutions risks the complete collapse of the financial system.
If that occurs, credit will be entirely unavailable. This is extremely important for the operation of commerce worldwide. It will make economic activity so much more difficult that the economy will contract severely. Huge amounts of jobs will be lost, many more bankruptcies will occur, and a big number of businesses will fail.
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