Thursday, September 18, 2008

Financial Crisis - The Bailout of AIG

The Federal Reserve splashed out a huge sum of 85 billions of U.S. dollars to bail out the beleaguered AIG. This gave the market a sigh of relief. Uncle Sam simply can't afford another giant to fall down.

The U.S. housing bubble's burst and the subsequent subprime mortgage crisis dragged the world's biggest economy into recession. More than that, Uncle Sam's financial system is now in deep trouble, making the whole world jittery.

From the collapse of The Bear Stearns Companies (one of the world's largest investment banks) in March 2008 to the fall of Lehman Brothers (filed for bankruptcy) and Merrill Lynch (being sold off to Bank of America on September 14, 2008), it shows how seriously the financial system in U.S. has been ruined by the toxin of the subprime mortgage loans.

When the subprime mortgage crisis first erupted in 2007, it was widely predicted the toxin would be pervasively spread out to impact the financial system at a magnitude not quantifiable.

The collapse of the three giants have not brought the storm to subside. The whole financial crisis is far from over.

There was a prediction at the start of the year that investors might see Dow Jones at 9,000 towards the end of the year. How probable is it? The trend now seems to be moving towards that direction.


rubberseeds said...

How about America's public sectors? How is the financial situation with the US government? It has been spending too much money on the wars in Iraq and Afaganistan.

Tony Hii said...

U.S. has the world's largest debts. The figure is growing everyday and it is prominently and publicly shown in the centre of New York city. But countries line up to lend money to this gigantic debtor, included in the list is Malaysia.

Toronto real estate agent said...

Hope this will be soon over. In Canada we begin to feel real estate troubles just in these months. But I think the biggest problem is, that all this happens now, few weeks before elections (we have elections some 3 weeks before the US presidential elections...). This is the worst time for any crisis, because politics and governments will definitely react in order to be elected and any rationality can be missing...
Take care

Anonymous said...

Using money to make money. Then where does additional money come from to allow them keep making profit? At one stage, the whole thing should collapse. If you steal from some where, some one else would be paying the price. The whole Wall Street is nonsense. All these bank people should be fired. These people are paid the highest, but when they need help, the government pumped in money. Is that fair?

Tony Hii said...

toronto real estate agent,I learned that the hit on Canada started months ago. My source told me that it is still bad.

anonymous, but they could no longer afford some more collapse. The domino effect might ruin the nation.