The worst financial pandemic- since the Great Depression- is roaring through USA, resulting in stocks worldwide going on a tailspin. The Indian stock market, which had already suffered bouts of downturn in recent times, havs further slid by 469 points at the end of the day on 15th September’08 taking the Indian Sensex below 14,000.
158 year-old Lehman brothers, a victim of housing loan crisis that erupted in USA about a year ago, is set to filing for bankruptcy. The crisis arose because small banks lent money to borrowers with dubious credit records. And the small banks got finances from Lehman selling their loans in the form of tradable securities. But when the borrowers defaulted, the value of these securities collapsed hitting Lehman badly. With over $600 billion debt on Lehman’s books, it is the biggest ever bankruptcy filing.
On the other hand, according to reports, American International Group (AIG), an associate of Tata Group in India and one of the largest insurance companies in the world, has asked US Federal Reserve for an emergency loan of $50 billion to tie over the financial crisis. The New York state official is said to have offered $20 billion in lifeline to AIG.
Merrill Lynch, the premier brokerage firm and third largest bank on Wall Street, worth more than $100 billion last year, will sell itself to Bank of America for half that valuation. The takeover would make the BankAm the top US Bank and was likely to put 24,000 of the 60,000 non-broker employees of Merrill out of work. That, combined with Lehman’s 26,000, would send shock waves in the US job market.
The Indian employment scenario is also likely to be affected in the professional sector with India’s premier business schools feeling the ripple. The Indian Institute of Management Calcutta had been the major beneficiary of recruitment from Lehman and Merrill Lynch.
Lehman also has a small operation in India with its captive back-office employing over 600 people in Mumbai who are likely to be out of work.
Uncertainty has gripped the minds of Indians who used to subscribe to various foreign mutual funds, insurance products and invested in the stocks of these companies. This once again proved, “All that glitters is not gold” and the storied symbols of American money might too are prone to huge failures.
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