When I drove to the Beverly Hills offices of Drexel Burnham Lambert on Feb. 13, 1990, the last thing I expected to hear was that the investment bank where I worked was going under. Yet early that morning, we were told that the company was filing for bankruptcy. I was, to put it mildly, blown away. At the time, Drexel had $3.5 billion in assets and was the biggest underwriter of junk bonds.
It all seemed like a very big deal at the time. But what’s happening this week makes me pine for the good old days.
When Lehman Brothers filed for bankruptcy on Monday, it became the latest but surely not the last victim of the subprime mortgage collapse. Lehman owned more than $600 billion in assets. Financial institutions around the world have already reported more than half a trillion dollars of mortgage-related losses and that figure will most likely double or triple before the crisis exhausts itself.
But there is a bigger potential failure lurking: the American International Group, the insurance giant. It poses a much larger threat to the financial system than Lehman Brothers ever did because it plays an integral role in several key markets: credit derivatives, mortgages, corporate loans and hedge funds.
Read it all from the op-ed page of today's New York Times.
Posted September 16, 2008 at 5:27 pm
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