Financial Crises Rock America

Wall Street is in turmoil in the wake of the most severe financial crises since the recession of the 1980's. Lehman Brothers, the largest US underwriter of mortgage securities, declared bankruptcy last week with no federal government bailout in sight. Meanwhile, Merrill Lynch reached a 50 billion dollar deal to sell itself to Bank of America, thereby avoiding Lehman's ignominious fate. American International Group (AIG), the largest insurer in the United States, dodged the bankruptcy bullet by receiving an 85 billion dollar emergency cash bailout from the federal government. These more recent events were preceded by the portentous collapse of the two largest mortgage buyers in the US, Freddie Mac and Fannie Mae, and the subsequent losses of other financial giants such as Bear Stern and Citigroup. While the stock market continues to plummet, the long term effects of the crisis on pensions, 401ks, and other savings accounts are, as is always the case with the stock market, largely unpredictable. It is quite likely, however, that the crisis will have adverse effects on the job market in the near future, and that the US tax payers will be responsible for absorbing the multi-billion dollar bailouts conducted by the federal government.