September 15, 2008
Wall Street is reeling today after The Bank of America announced that it will buy Merrill Lynch, the largest US brokerage company, for $29 per share or close to $50 billion. The proposed share sale price represents a 70% premium over last Friday's closing price of $17.05 for Merrill stock. In other dramatic news, Lehman Brothers has been forced to declare Chapter 11 bankruptcy after failing to arrange a rescue attempt to save the company. Lehman is holding an estimated $60 billion in toxic real estate holdings.Global Stock market plunged overnight that has led stocks here in the US to plummet at the open of trading. The Dow Jones Industrial Average has fallen more that 300 points. Oil prices are also moving lower this morning as Lt. Sweet Crude is down more that $4 at $96/barrel. The fallout continues as AIG, the world's largest insurance company, announced it is restructuring its assets and is seeking to raise an additional $40 billion in capital to avoid a credit rating downgrade. There is speculation AIG will need to borrow directly from the Fed. To make this process easier, the Fed announced last night it is expanding the types of collateral financial institutions can pledge to obtain emergency loans.In an effort to avoid an international meltdown, the Federal Reserve and a global consortium comprised of Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS agreed to provide $7 billion each to create a $70 billion pool of emergency funds to lend to distressed financial companies. According to the banking group, the newly created capital pool is designed "to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."
Rates for Loans under 697,500 have fallen dramatically in the last couple of days from this news but the jumbo rates have been unaffected.
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