Lehman Brothers will declare bankruptcy. The US Government decided that they did not want to back up Lehman’s $60 billion of bad real estate investments, nor did Barclay’s, nor did a plan to have all the major Wall Street firms pitch in $60 billion to purchase Lehman’s bad real estate assets and create what’s knows as a “Bad Bank” work out. (“Bad Bank” was chosen because the names Countrywide, Washington Mutual and IndyMac had already been taken.) Many investment banks worked over the weekend to figure out their exposure to Lehman Brothers, especially to their real estate investment portfolio.
Bank of America said it would acquire Merrill Lynch in an all-stock transaction worth about $50 billion. Bank of America has the most deposits of any U.S. bank, and has both theirs and Countrywide’s servicing portfolio, while Merrill Lynch is the world’s largest and most widely recognized brokerage – it certainly will create a monolithic global financial services giant. I don’t know if that is a good thing right now…
