Financial Fallout Continues on Wall Street with Impending Lehman Brothers Chapter 11 Bankruptcy Filing, Sale of Merrill Lynch To Bank of America

Wall Street is crapping all over Americans

Will this be a BLACK MONDAY for the financial markets? Well, this has to be the most dramatic day in Wall Street history. Two deeply entrenched companies are scrambling to stay afloat. First, Merrill Lynch has agreed to sell itself on Sunday to Bank of America Corp. for roughly $50 billion to avert a deepening financial crisis, even though on Friday, they said they were solvent. Second, the biggest shock comes courtesy of Lehman Brothers, which has said that it will seek bankruptcy protection as it hurtles toward liquidation after it failed to find a buyer. This is, indeed, a shocking turn of events for two companies that have been so tightly woven in Wall Street history. This is very humbling, that even the mighty can fall. This will reshape the landscape of Wall Street in more ways than one. This marks the latest chapter in a very tumultuous year in which storied financial institutions have been literally brought to their knees as a result of billions of dollars of losses because of bad mortgage finance and real estate investments. I remember the days when you were automatically elevated to a level of prominence if you worked for either of these companies. You were going places and I have no doubt that was true.

But the drama may not be coming to an end soon. It seems that another financial crisis is looming. The fate of insurance giant American International Group, known as AIG, appears to be on the brink itself. I do some freelance writing for a financial site and AIG was one of the companies I wrote about this weekend. Staggered by massive losses stemming from the credit crisis, the company sought a $40 billion lifeline from the Federal Reserve, without which, the media is reporting, the company may only have days to survive.

This is, indeed, a stunning series of events on Wall Street. Now I am by no means blaming President and his Administration for this, but damn, what else is going to transpire under his watch? This brings me to the point I want to make. Is John McCain the answer to solve the problems that ails the nation? I don’t think so. This is the same man who does not know how to use a computer or know how many houses he has. It is as basic as that.

It remains to be seen whether the sale of Merrill, which was worth more than $100 billion during the last year, and the controlled demise of Lehman will be enough to finally turn the tide in the yearlong financial crisis that has crippled Wall Street and threatened the broader economy. How things play out could affect the broader economy, which has been weakening steadily as the financial crisis has deepened over the last year, with unemployment increasing as the nation’s growth rate has slowed.

The sad reality for Lehman Brothers, which was founded in 1850 by German immigrant Henry Lehman and his brothers Emanuel and Mayer Lehman, will file for Chapter 11 bankruptcy protection in New York for its holding company. This will, undoubtedly, result in what would be the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago. This comes on the heels of the government bail-out of mortgage giants Fannie Mae and Freddie Mac last week. What will happen to Merrill’s 60,000 employees or Lehman’s 25,000 employees remains unclear.

What does this mean for the consumer? A helluva lot. We will need to tighten our belts a whole lot more. I think the government should freeze foreclosures for a year, as this mess corrects itself. In the aftermath of Hurricane Ike, gas prices are skyrocketing and some gas stations have no gas. We are in a sad state of affairs. It is more critical than ever for us to vote for the candidate that will best address the pressing financial needs of the country. My bet is on Barack Obama because I don’t think that John McCain has a clue and Sarah Palin, though she has been billed as a reformer, can wing this all by herself. Not in my wildest dreams did I ever envision that Wall Street would be under siege as it is today. This will have a ripple effect on financial markets worldwide.

Filed under: AIG, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch