The BBC reported Saturday that top financial experts in the UK were also expressing concern over the health of the US economy given the precipitous 80% drop in the stock of the US's fourth largest investment house, Lehman Brothers, last week.
Barclays PLC, headquartered in London, had appeared, earlier in the weekend, to be a top contender to buy at least part of Lehman Brothers, if a deal was reached splitting the investment behemoth into parts: a more palatable "good bank" that Barclays would have presumably purchased, and a "bad bank" that would have been propped up by a collection of Wall Street investment houses. But Barclays left the negotiations table on Sunday without a deal.
Barclay's reluctance to buy even a healthy slice of Lehman's pie without substantial guarantees from the Bush Administration, a posture Treasury Secretary Henry Paulson did not want to assume, may be due to a downgrade in economic expectations in the UK. Scotsman.com reported on September 15th that British "...business leaders today joined the voices forecasting a recession in the UK economy and demanded a half-point cut in interest rates to help revive growth."
In other developments on late Sunday afternoon indicative of a general financial meltdown, American International Group, or AIG, is nearing some agreement on a major re-structuring plan, according to the NYT, that will include the sale of its aircraft leasing operation and other business units. AIG lost 79% of its value in market trading last week and reportedly has billions of dollars in losses.
Bank of America is also reporting early Sunday evening that it is in talks to purchase Merrill Lynch (NYSE: MER). The company founded in 1914 by Charles E. Merrill occupies all 34 floors of Four World Financial Center in Manhattan. In November of last year, Merrill Lynch announced the write-down of $8.4 billion in loss connected to the American mortgage crisis, and removed Stan O'Neal as CEO.
Just this past week, the United States government announced it was taking over conservatorship of Fannie Mae and Freddie Mac, two of the largest American mortgage banks, in an effort to prevent future rupturing in a rapidly deteriorating US housing market.
The bursting housing bubble may not be confined just to the United States: The Australian online reported Monday, September 15, 2008 that "[h]ome building starts have plummeted to their lowest number in a year"....in Australia. "Just 38,348 homes were started in the three months to June, a seasonally-adjusted drop of 3.7 per cent on the March quarter, the Australian Bureau of Statistics said." Shares headed downward on the Sydney All Ordinaries at the opening of trading on Monday.
The financial titans Goldman Sachs Group, Inc. and Morgan Stanley are expected to announce declines in quarterly profits this week according to another news item by the AP.
In an unbelievable deluge of breaking financial news on Sunday evening leading into Monday morning trading, other developments, such as the forecast for savings-and-loan giant Washington Mutual remained clouded.
Financial experts expressed further concern on Sunday evening that some traders might take advantage of a "climate of fear" to engage in short selling in an effort to take over other large, vulnerable firms according to a report by Louise Story of the NYT. Sources noted that some executives pleaded with Paulson, Geithner, and Cox to restore restrictive rules on short selling to minimize hostile overtures when markets resume trading on Monday morning.
REUTERS was reporting just before 8 PM ET that a group of American and foreign bankers were in discussions to create an international fund of as much as $50 billion to shore up the global financial system in light of the troubling economic indicators coming out of the United States. By 10:30 PM ET Sunday night, the AP reported that figure had jumped to $70 billion with Goldman Sachs Group, Inc. and JP Morgan Chase & Co. each pledging $7 billion to the fund. Other contributors included Bank of America, Barclays PLC, Credit Suisse Group, Deutsche Bank AG, Merrill Lynch & Co., Morgan Stanley, and UBS.
US government officials also were said to be amenable to widening the Federal Reserve's discount lending window to forestall, at least temporarily, further systemic failures. In addition, the United States agreed to accept additional high-risk corporate assets as collateral against further loans by financial companies.