Lets just let it all implode and start from scratch. It can't be any worse

AIG had to be bailed out. If AIG would have failed, you would have seen many, many other institutions go right along with them. Did they make a mistake insuring bad mortgage-backed securities? YES. But they aren't the only ones - blame subprime borrowers, brokers, lenders and investors for this mess. Oh, and market deregulation. Unfortunately, borrowers didn't read the fine print about ARM's and many times put nothing down - therefore had nothing to lose when they defaulted on their loan. And brokers still got paid their commission upfront whether borrowers defaulted or not. So the lenders and investors were the ones who lost big. Unfortunately there's no time machine to go back and fix all this... just very curious to see if AIG will be able to raise cash to pay the Fed, how the remaining Wall St firms will fare - and also how the real estate market here will hold up.

I love how AIG and other institutions will get a SOCIAL bailout yet profits remain PRIVATE. What a fccuked up system.

I bet Spitzer will be happy because he has a large investment with them - I wonder if he was able to exert some influence for the bailout ?

The Company was just too big and too vital to the financial markets for the government to allow it to fail. Current common shareholders still got hammerred on the deal though ...



AIG Gets Up to $85 Billion Fed Loan; Cedes Control (Update1)

By Craig Torres and Hugh Son

Sept. 16 (Bloomberg) -- The U.S. government agreed to lend as much as $85 billion to American International Group Inc. in exchange for a 79.9 percent stake to save the country's biggest insurer from collapse.

The Federal Reserve ``determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance,'' the Fed said.

The agreement, supported by the Treasury Department, will keep New York-based AIG in business, averting a failure that could have threatened more financial companies and added to chaos in world markets. Losses industrywide could have totaled $180 billion if AIG collapsed, according to RBC Capital Markets. AIG needed the loan after its credit ratings were cut and shares plunged 79 percent since Sept. 11.

The two-year loan will ``assist AIG in meeting its obligations as they come due,'' the Fed said in its statement. The federal lifeline will allow AIG to sell assets in an orderly fashion rather than at distressed prices, said a person familiar with the agreement.

``The loan is expected to be repaid from the proceeds of the sale of the firm's assets,'' the Fed said. The U.S. government has the right to veto the payment of dividends to common and preferred shareholders.

AIG will replace management as part of the deal, said the person, who declined to be named because not all parts of the agreement were publicly disclosed.

Interest will accrue on the outstanding balance at the three-month London interbank offered rate plus 8.5 percentage points.

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net.

Last Updated: September 16, 2008 21:27 EDT

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Maybe I should have said "was" increasing rapidly? We'll have to see, that's why I said it all depends.

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Foreign buyers? This is a worldwide mess!!! Why would would they invest in a market that is going down the drains when their economies are being affected too!

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It's certainly a crap shoot. A lot of it depends on the foreign buyers, a pool that is increasing rapidly.

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You think you are joking, but it's possible that this part could be true.

So I've been listening to the news on and off today. AIG is in big trouble. The man said that if AIG fails it will be worse than the end of the world. Worse than Y2K even. We will all be poverty stricken. We will wear rags and have no shoes. Money will be worthless. A loaf of bread will cost $57,000 if you can even find one. There will be no more pancakes. We will live like wild animals. The sun will begin to burn out and there will be 24 hour darkness. There will be pestilence and no exterminators. Now is the time to PANIC! I am stocking up on pork & beans and guns. I have boarded up my doors and windows so don't ring my bell, I won't answer the door. I feel personally responsible for this. AIG sent me offers for car insurance in the mail and I threw them away without even reading them. They asked for MY help and I refused. Maybe if I had bought their insurance all of this could have been avoided. Maybe I could have saved the world.

I read that AIG is in the siht and will need to be bailed out.

"Lopez, who declined to say who he worked for, said he thought it would take two or three years for a recovery."

What is this going to do to the housing sales for downtown jc that are always listed, the development of the neighborhood as a whole, and the general optimism of the immediate future for DJC that seems to be a common thread for this forum?

Certainly not downplaying the job loss for those effected by today's events; just acknowledging the fact that the finance industry investing here has been a big engine driving a lot of the growth and concerned that this may be at the least a temporary "road closed for further repairs" sign that may not be fixed that quick.

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none.

Some JC related articles:


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Wall Street turmoil could be felt on Jersey City waterfront

by The Jersey Journal
Monday September 15, 2008, 9:05 AM

The turmoil this weekend on Wall Street may have a direct effect on the Jersey City financial district, home to large offices of two companies that are figuring prominently in today's news.

Merrill Lynch, which was purchased by Bank of America for $50 billion, occupies the city's second-tallest building at 101 Hudson St., while AIG, which is also likely facing a major restructuring and has the federal reserve for $40 billion, has offices at 90 Hudson St.

====================================
An anxious commute for financial workers in Jersey City

by Beth Fitzgerald/The Star-Ledger
Monday September 15, 2008, 8:50 AM

Workers for Lehman Brothers and Merrill Lynch filed grimly into work along the Jersey City waterfront this morning, waiting for word on their fate.
Matt Rainey/The Star-LedgerAn uneasy day for Lehman Brothers and Merrill Lynch workers on Jersey City's waterfront
"The mood is uncertainty, really," Meredith Lifrieri, an assistant vice president in product development for Lehman, said as she headed to her office on Hudson Street. "I'm waiting to see if I still have a job."

Lifrieri, who is 25 and lives in Cranford, said she wasn't sure where she would look if she was let go by the firm, where she's worked the past three years. The job market for financial services workers is already tight with the collapse of Bear Stearns earlier this year.

"Well, maybe not in finance," she said. "Maybe in some other industry. We'll see."

Wall Street was rocked by a double shot of bad news Sunday, when Lehman Brothers announced plans to file for bankruptcy and Merrill Lynch said it would sell itself to Bank of America. In addition, the insurer AIG is scrambling for capital to avoid a devastating credit rating downgrade.

Jersey City is heavily dependent on the financial industry, with many of the towers that loom over the Hudson River filled with satellite operations for the nation's largest investment firms. As PATH trains disgorged commuters at Exchange Place before the market's opening bell, there was a distinct air of unease.

"I'm anxious, but hoping for the best," said Arti Dua, a relationship manager for Merrill Lynch. "I'm trying to keep a positive outlook."

One woman, who declined to give her name but works in Lehman's legal department, said she thought the investment house's situation may not be as dire as it seems from the outside.

"I don't think they'll just let the firm close," she said. "I'm looking for a brighter day."

Others were less optimistic about the toll the mortgage crisis has taken. Referring to Lehman chief executive Richard Fuld, another employee said: "Dick has survived so much before this, he's a never-give-up guy. That's probably his Achilles' heel. He probably should have seen the light earlier."

By 9:25 a.m., most financial sector workers had trooped into their offices. With the market about to open, Joe Lopez -- a 20-year veteran of the securities industry -- shook his head.

"This is horrible, horrible, horrible," said the Old Bridge resident. "First it was Bear Stearns, then Lehman, now Merrill Lynch. We've lost three huge banks. This is really, really bad. We've been warned, but people didn't think this could happen."

Lopez, who declined to say who he worked for, said he thought it would take two or three years for a recovery.

"There are a lot of good people competing for these jobs, not just here but nationwide," he said. For the past three months, I've been telling people they need to be liquid because the market might take a dip."

========================
Dependent on Wall Street, NJ braces for impact

By WAYNE PARRY | Associated Press Writer
September 15, 2008

ATLANTIC CITY, N.J. - From young stock market professionals in Hoboken who suddenly find themselves unable to pay the mortgage or patronize the city's restaurants and bars to Atlantic City casinos struggling to borrow money to expand or pay down debt, the Wall Street crisis is making itself felt in a big way in New Jersey.

Gov. Jon Corzine said between a quarter to a third of New Jersey's economy depends on Wall Street, either directly or indirectly. The bankruptcy of Lehman Bros. and the forced sale of Merrill Lynch at a price half of what it was worth a year ago will cause widespread pain in New Jersey, he added.

"I'm worried about the state budget, the state economy in the context of the very dramatic restructuring that is taking place on Wall Street," Corzine said Monday morning during an appearance in Ewing Township. "The northern half of the state, there are many, many people who are involved with that industry. That's one of the reasons you have high levels of income in the state."

In July, the head of New Jersey's Economic development Authority said nearly 1,700 employees of Lehman Brothers worked in the Garden State. The state labor department would not say how many Merrill Lynch employees work here.

New Jersey's investments will take a hit from the weekend meltdown, but the state deliberately diversified its assets to avoid overexposure to just such a problem, state Treasurer David Rousseau said.

"We have exposure to every sector; when financial stocks suffer the most severe shocks in decades, we will lose market value in that sector," he said. "While we owned a small position in Lehman Brothers, we note as well that New Jersey, unlike most peers, completely avoided exposure to market losses because we did not own any Freddie or Fannie common stock when they were seized by the U.S. Treasury.

Corzine, the former co-chairman of Goldman Sachs, worries about significant job losses.

"Both Lehman and Merrill have substantial operations in the state," he said. "And any time you have a bankruptcy, you have to worry that there are going to be closures, and people will lose their jobs."

Hoboken Mayor David Roberts said thousands of his city's residents work on Wall Street. He's concerned about the impact of unemployed residents who can no longer make mortgage payments, or spend money in restaurants and bars.

"Having so many young people lose their jobs is certainly cause for concern," he said.

He could not estimate the impact on the city's budget next year.

Senate Majority Leader Stephen Sweeney on Monday called on the Legislature to convene an emergency economic summit to address the impact of the job losses and economic downturn on New Jersey's workers and businesses.

But Newark actually hopes to profit from the turmoil.

"We are perpetual, unapologetic optimists in Newark," said Deputy Mayor Stefan Pryor. "To some degree, that optimism is based on the economic downturn and the fact that in pricey markets like Manhattan, CEOs are deciding to locate parts of their operation in lower-cost locations. So the market turbulence could actually work to the advantage of cities like Newark."

Merrill Lynch is the second-largest employer in Mercer County, with about 6,000 employees working in a huge complex it moved into in Hopewell Township a few years ago.

Joseph Seneca, an economics professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said the merger of Bank of America and Merrill Lynch, both major employers in New Jersey, will lead both companies to eliminate jobs and close or sell some offices. He said the fallout from the latest surprise on Wall Street could include even tighter credit, keeping companies and individuals from being able to borrow.

That is an increasingly serious problem in Atlantic City, the seaside gambling resort that's heavily dependent on financing for expansion projects and paying down massive amounts of debt.

Already, two massive casino-hotel projects have been delayed by the credit crunch; Pinnacle Entertainment and MGM Mirage have put a combined $7 billion worth of Atlantic City projects on hold until credit markets improve.

But the prospect of even tighter financing _ not to mention thousands of suddenly unemployed stock brokers and investment bankers _ is worrying some here.

"It's adding to an already challenging climate," said Joel Simkins, senior vice president of Macquarie Securities. "Not only is Wall Street an important source of financing for the casinos, but Wall Street is also a good customer of Atlantic City. Traders and investment bankers frequently visit the casinos as guests and spend a good deal of money there as well, so there could be an impact in that regard."

___

Associated Press writers Angela Delli Santi in Ewing and Linda A. Johnson in Trenton contributed to this story.

Governor David Paterson said today that the state is working to make sure that Lehman's 12,000 employees that live in the New York area get access to the benefits they are entitled to and will provide any training they need.

Trying to be positive here... financial firms looking to cut costs may look to lease office space in NJ rather than NYC where the cost per square foot is much higher. A few years ago the firm I had worked for was afraid to move lots of their employees to NJ because the initial reaction was so negative (they did the move anyway and many employees left the firm as a result). But today the attitude is different - most people in the industry feel lucky to have a job. I'll be interested to see how long it will take for the Lehman office space to be taken over by another tenant.

An anxious commute for Merrill Lynch and Lehman workers
by Beth Fitzgerald/The Star-Ledger
Monday September 15, 2008, 9:23 AM
Workers for Lehman Brothers and Merrill Lynch filed grimly into work along the Jersey City waterfront this morning, waiting for word on their fate.

"The mood is uncertainty, really," said Meredith Lifrieri, an assistant vice president in product development for Lehman, as she headed to her office on Hudson Street. "I'm waiting to see if I still have a job."


Robert Sciarrino/The Star-Ledger
An employee of Merrill Lynch touches the company name plate as he arrives at the Jersey City offices at 15 Exchange Plaza.


Lifrieri, who is 25 and lives in Cranford, said she wasn't sure where she would look if she was let go by the firm, where she's worked the past three years.

"Well, maybe not in finance," she said. "Maybe in some other industry. We'll see."

Wall Street was rocked by a double shot of bad news Sunday, when Lehman Brothers announced plans to file for bankruptcy and Merrill Lynch said it would sell itself to Bank of America. In addition, the insurer AIG is scrambling for capital to avoid a devastating credit rating downgrade.

Jersey City is heavily dependent on the financial industry, with many of the towers that loom over the Hudson River filled with satellite operations for the nation's largest investment firms. As PATH trains disgorged commuters at Exchange Place before the market's opening bell, there was a distinct air of unease.

"I'm anxious, but hoping for the best," said Arti Dua, a relationship manager for Merrill Lynch. "I'm trying to keep a positive outlook."

One woman, who declined to give her name but works in Lehman's legal department, said she thought the investment house's situation may not be as dire as it seems from the outside.

"I don't think they'll just let the firm close," she said. "I'm looking for a brighter day."

Others were less optimistic about the toll the mortgage crisis has taken. Referring to Lehman Chief Executive Richard Fuld, another employee said: "Dick has survived so much before this, he's a never-give-up guy. That's probably his Achilles' heel. He probably should have seen the light earlier."

Not a good day for Wall Street:

-Lehman (25,000 employees) declares Bankruptcy

-Merrill (61,000 employees - not all in the NY area obviously) gets bought by Bank of America (a fair amount of overlap in those 2 companies)

-AIG on the ropes

-Washington Mutual's stock is down to $2.25/share

I'm guessing the NJ & NY state budgets just got a lot worse and this certainly isn't good news for NYC and surrounding areas real-estate markets.

Keep your head up JC-Listers!

I work for a company in JC that does printing for a lot of financial houses. When JP Morgan bought out Bear Sterns we lost that account b/c JP Morgan isn't one of our clients. Lehman is our client, so I suppose that unless one of out other clients buys Lehman we'll lose that account too.

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Because the CEO'S of these major firms allways make out and screw the employees that made them all the millions.

Isn't Capitolism just wonderful........???

CK

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I know I'm being naive here, but if you lead a firm into bankruptcy, how can your termination be without cause?

Staff gathered in a meeting room at the Lehman Brothers office in Canary Wharf in London on Thursday.

================================
For Lehman Employees, the Collapse Is Personal

New York Times
By GERALDINE FABRIKANT and ERIC DASH
September 11, 2008

In the last few days, employees of Lehman Brothers have wrung their hands as the value of their stock evaporated before their eyes. Now, many fear losing their jobs, too.

The Lehman Brothers office in Midtown Manhattan. ?Everyone was always hoping we would pull through. Now, that is not really an option,? said one employee.

In scenes eerily reminiscent of the final days of Bear Stearns, the megawatt energy within Lehman Brothers has dimmed to a hum as employees focus on the fate of the firm and what it might mean to them. To make matters worse, pink slips for previously announced layoffs were being handed out this week.

?Everyone is walking around like they have just been Tasered,? said one Lehman employee, who, like many interviewed for this article, declined to be named because he was not authorized to talk publicly. ?Everyone was always hoping we would pull through. Now, that is not really an option.?

On Lehman?s third- and fourth-floor trading floors overlooking Broadway?s lights in Midtown Manhattan, traders continued working at their terminals, or at least were giving the appearance of doing so. At the same time, many polished their r?sum?s and contacted recruiters.

If Lehman is sold ? as now appears likely ? the buyer will fire many of them. And they know that tens of thousands of other Wall Streeters laid off in the tsunami sweeping the financial industry ? including many recently let go from Bear Stearns ? are already chasing after too few jobs.

Wall Street is used to ups and downs, but this latest round of cuts brought about by the credit crisis is turning out to be one of the worst in recent memory ? a fate compounded by a shrinking economy. As of June, many of the more than 83,000 employees dismissed from banks and brokerage firms worldwide have come from firms based in the New York area.

Everyone at Lehman knows what happened at Bear Stearns: Star employees did not have a hard time finding work when Bear was sold in a fire sale this year, but JPMorgan initially kept only about 6,500 of 13,500 employees. Many are still looking for work.

As at Bear, many at Lehman have taken a hit from a plummeting stock price. From an all-time high of $86.18 a share in early 2007, the stock has plunged, closing at $4.22 Thursday.

In an arrangement that is typical of Wall Street, Lehman employees have gotten much of their pay in stock and stock options in recent years. That figure could range from 10 percent to 60 percent in Lehman stock, according to a person close to the company.

?Over the past decade an increasing amount of the compensation had been given in stock and stock options,? said Robert Willens, a tax expert who worked at Lehman from 1987 to this year. ?Employees were paid in restricted stock that took several years to vest. Stock was granted at the current price.?

As recently as last week, Lehman?s stock was selling for $16 a share, and many Lehman employees were still betting that their chairman and chief executive, Richard S. Fuld Jr., would figure out a way to salvage the bank, and their future ? a hope he reinforced Wednesday with assurances to Wall Street that the firm could remain standing alone.

On Thursday, those hopes ran dry as the share price plunged so low and so fast that potential suitors came out of the woodwork to see if they could snap up the 158-year-old institution for a bargain-basement price.

As employees left the firm?s Seventh Avenue headquarters Thursday, a Lehman trader said people were trying to keep a stoic face. ?They are not showing anything,? he said.

As widely respected and liked as Mr. Fuld has been at the firm, now that the cold prospect of losing a life savings in Lehman stock has become more of a reality, many employees have grown resentful.

?We feel like we have been controlled by events and haven?t controlled them,? said one rank-and-file employee. ?And it has just been the most punitive market. Is there frustration with the management team? Of course.? Another employee who left Lehman earlier this year lamented that he had put enough faith in the firm to retain shares ? a decision he is paying for. ?My children?s education fund is wiped out,? said this person.

?I?m not a millionaire like a lot of these guys. Of course this is on Dick?s hands,? he said, referring to Mr. Fuld. ?It all happened on his watch.?

The investment bank said that Mr. Fuld was not available for comment.

A number of Lehman employees said the widespread support at the firm for Mr. Fuld was not as strong as it had been, largely because his strategy to save Lehman, including the partial sale of Neuberger Berman, its money management unit, would not be enough. These people said they had expected and hoped that Mr. Fuld would step aside Wednesday and let Herbert H. McDade III, the firm?s president, ascend and start anew.

Mr. Fuld himself has seen much of his wealth disappear. At the stock?s peak, his 11.4 million shares of various types of stock and 2.5 million stock options were worth about $956 million, according to James F. Reda Associates, a consulting firm. Now, they are worth only about $40 million. But employees know that Mr. Fuld has reaped rich rewards in his decade and a half at the helm.

Even if he loses his grip at Lehman, he stands to collect more. He does not have a severance agreement if he loses his job, but if he were terminated without cause, Mr. Fuld could expect to collect a $16 million pension and $5.6 million in deferred compensation.

Michael J. de la Merced and Ben White contributed reporting.

Most of their approximately 1863 employees are at 70 Hudson Street. They occupy the entire building.

Yes, (when I was interning w/ them 14 years ago) they had most of the their back offices at 101 Hudson. Although I did hear (since then) they also occupy additional office spaces throughout Exchange Place.

Either way, it doesn't look good for LEH...

You mean HSBC ? That or someone else will own them by Monday.

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Yes, they indeed have a large operation here in JC at 101
Hudson.

News looks very bleak for most employees...

CK

I should have posted the story:

The WSJ story is here:
http://online.wsj.com/article/SB12211 ... tml?mod=hpp_us_whats_news

Subscription is needed for the WSJ, but here is the jist (from briefing.com):

WSJ reports the co is actively shopping itself to potential suitors, including Bank of America (BAC), people familiar with the matter said. The need for a sale intensified as Lehman's shares dropped 45% in Thursday trading, creating new doubts about its ability to trade with other Wall Street cos while keeping its best talent.

But potential buyers remain wary about plugging holes in Lehman's balance sheet, and are increasingly looking to the U.S. government to help backstop future losses, according to people familiar with the talks. A number of these buyers would "come out of the woodwork," if the U.S. were to step in, said one person monitoring the process. It remains unclear whether the U.S. Treasury or Federal Reserve would take such steps, as was done when the government assisted J.P. Morgan Chase in its Bear Stearns takeover in March.

Bank of America, which is holding preliminary discussions about a transaction, appeared to be Lehman's best hope on Thursday afternoon. BofA may only do a Lehman deal if it is encouraged by the federal government, since it has its hands full digesting mortgage lender Countrywide Financial. Still, the situation was so fluid Thursday that people involved in the deal talks said it was too soon to say what shape a sale would take or if it would happen at all. Without explicit government support, a range of other suitors have proven uninterested in absorbing Lehman and its $600 billion balance sheet.

Goldman Sachs (GS), for example, is not bidding on the company, said a person familiar with the matter. Other much-discussed buyers, including France's BNP Paribas, the UK's HSBC (HBC), Germany's Deutsche Bank (DB), Spain's Banco Santander (BBD), are not expected to participate. One outside potential remains Barclays (BCS), the UK's third largest bank which has been eager to expand its investment-banking franchise around the globe.

Chances are they get taken down tomorrow or over the weekend. I see that firm-wide they employ almost 26,000 people and I think they have their back-office located in Jersey City. Anyone know for sure?

In any case there's a story going around by the Wall Street Journal that Bank of America is in talks to buy them. If that happens there'll be a fair amount of overlap between those two organizations. Not good news for the job situation in NYC/Jersey City.