Business - Chaos as Wall St. heads for open

Shares in Lehman (NYSE: LEH) opened down 84% in Europe. Shares in some banks there were off 10%. The Dow futures were down over 300 points.
The announcement of a planned Chapter 11 filing by Lehman and the word that AIG (NYSE: AIG) would ask the Fed for a $40 billion loan touched off panic in the markets. This was not buffered by news that Bank of America (NYSE: BAC) would pay over $50 billion for Merrill Lynch (NYSE: MER) or that the Fed would make emergency funds available to banks and brokerages.

While ten large banks set up a $70 billion borrowing facility which any of them could use in a crisis, it was not clear whether that sum would be nearly enough.

It's odd that almost all of these losses can be traced to the the American consumer who has watched the value of his home fall by 20% and may see it fall much further.

Most of the pain on Wall Street comes from bets which firms made that US real estate would trend higher and that mortgage default rates would stay relatively low.

It may be the worst bet Wall Street ever made.



Source : blogginstock