Wallstreet Crisis

Investment banks

Source: http://online.wsj.com/article/SB122139688846233147.html?mod=special_coverage

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Crisis on Wall Street as Lehman Totters,
Merrill Is Sold, AIG Seeks to Raise Cash

Fed Will Expand Its Lending Arsenal in a Bid to Calm Markets;
Moves Cap a Momentous Weekend for American Finance

By CARRICK MOLLENKAMP, SUSANNE CRAIG, SERENA NG and AARON LUCCHETTI
September 15, 2008; Page A1

The American financial system was shaken to its core on Sunday. Lehman Brothers Holdings Inc. faced the prospect of liquidation, and Merrill Lynch & Co. agreed to be sold to Bank of America Corp.

The U.S. government, which bailed out Fannie Mae and Freddie Mac a week ago and orchestrated the sale of Bear Stearns Cos. to J.P. Morgan Chase & Co. in March, played much tougher with Lehman. It refused to provide a financial backstop to potential buyers.

Without such support, Barclays PLC and Bank of America, the two most interested buyers, walked away. On Sunday night, Bank of America struck a deal to buy Merrill Lynch for $29 a share, or about $44 billion. Lehman was working on a possible bankruptcy filing that would allow most of its subsidiaries to continue operating as the firm is wound down.

Fannie Mae and Freddie Mac

Fannie Freddie

Source: http://www.nytimes.com/2008/09/06/business/06fannie.html?_r=1&hp&oref=slogin

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U.S. Rescue Seen at Hand for 2 Mortgage Giants

By STEPHEN LABATON and ANDREW ROSS SORKIN

Published: September 5, 2008

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Under a conservatorship, the common and preferred shares of Fannie and Freddie would be reduced to little or nothing, and any losses on mortgages they own or guarantee could be paid by taxpayers. Shareholders have already lost billions of dollars as the stocks have plunged more than 80 percent this year.

A conservatorship would operate much like a pre-packaged bankruptcy, similar to what smaller companies use to clean up their books and then emerge with stronger balance sheets. It would allow for uninterrupted operation of the companies, crucial players in the diminished mortgage market, where they are now responsible for nearly 70 percent of new loans.