Financial Crisis on Wall Street

When Bear Stearns sold out in a panic to JP Morgan this March, Wall Street breathed a sigh of relief. Yes, one of the most venerable institutions in American financial history bit the dust. But JP Morgan prevented an even greater catastrophe by buying Bear Stearns out at $10 per share.

Today, Wall Street is facing a graver crisis as Lehman Brothers faces total collapse, and Barclays has failed to reach a deal to bail Lehman Brothers out. Now, Lehman Brothers, a 158-year old investment bank is preparing to declare bankruptcy and liquidate its assets. The government has not signaled any intention to bail Lehman out, and nobody knows the financial fallout.

Lehman, it seems, is not the last domino to fall. Merrill Lynch faces a similar crisis and is looking to an “11th hour” deal by Bank of America to combine brokerages. And that leaves insurer AIG and Washington Mutual teetering on the brink of financial collapse. All of this follows the government bailout of Freddie Mac and Fannie Mae over the last week.

I’m no financial expert. But I know enough to say that, at this point, the Wall Street financial crisis is THE most important political issue of the day. This has been building for quite some time, beginning with the fall of subprime lenders in 2007. The real estate crash then led to a nationwide recession which, coupled with high gas prices, has devastated millions of American homeowners and consumers. The economy has yet to recover from this double whammy of financial crisis and high energy prices.

I have no idea what the government should do at this point. Perhaps the government should just stay out and let the markets work itself out. Maybe the government should provide some sort of major bailout package to prevent a total collapse in the financial markets. I really don’t know. But I hope that both of our Presidential candidates will offer some kind of vision for the future of our financial services industry.