As the investment bank nears its demise, what’s in it for the property market?
The Lehman Brothers’ (LB) financial tumult has started to shake things further in the real estate industry. This follows after the Fed refused to back up the investment bank’s losses – which is completely different how the government recently assisted Bear Sterns. The troubled bank was acquired by JPMorgan Chase & Co. in March, but no one seems to want to do the same for LB this time. With the refusal of the Fed, two banks – Barclays Capital and Bank of America had no intention of acquiring LB since there will be no tax payers’ money to absorb the high risk that the crumbling institution has posed.
There’s no bit of esotericism attached to this matter except for the details of the bank’s countless financial services. What resulted in one of Wall Street’s worse mismanagements of a $60 billion real estate portfolio happened in one of the worst economic periods in history. The Fed’s decision to put off any plans of absolving the long-term crisis of LB was partly as a result of the bailing out Freddie Mac and Fannie Mae.
No, the Fed doesn’t play favorites at all. It just doesn’t have any sane reason why a top management’s ordeal shall be salvaged by Americans who do not have any thing to do with the loss. Now, taxpayers can seal their lips and watch what happens to the investment bank’s downfall without having to rally against another bail out.
On the other hand, it is worth knowing that LB’s employees would have to be unapologetically axed. It doesn’t concern the top guns and Ivy Leaguers who proved their careers competitively. Most execs can be hired anytime by any company a few blocks away and recoup their career losses financially in a month’s time. The more affected employees however are the ones in lowly positions who do not have any business school merits in their resumes.
The market has been affected with the news. a href=”http://www.businessweek.com/ap/financialnews/D936Q1LO0.htm”>Businessweek reported that LB’s stock dove 95 percent after a 52-week high last September 12. This is just a precursor of the things to come. It is expected to plunge further before its bankruptcy filing. With the continued market downfall, we know that it’s not over until the fat lady sings. What’s certain is that it’s unlikely other banks will salvage any losing company with out the government entering in the scene.