Word: trillion
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...Every day brings another financial horror show, as if Stephen King were channeling Alan Greenspan to produce scary stories full of negative numbers. One weekend, the Federal Government swallows two gigantic mortgage companies and dumps more than $5 trillion - yes, with a t - of the firms' debt onto taxpayers, nearly doubling the amount Uncle Sam owes to his lenders. While we're trying to get our heads around what amounts to the biggest debt transfer since money was created, Lehman Brothers goes broke, and Merrill Lynch feels compelled to shack up with Bank of America to avoid a similar fate...
...Wall Street's euphemism for junk - are where the problems started. That's true, but the problems have now spread way beyond them. Those predicting that the housing hiccup wouldn't be a big deal - what's a few hundred billion in crummy mortgage loans compared with a $13 trillion U.S. economy or a $54 trillion world economy? - failed to grasp that possibility. It turned out that Wall Street's greed - and by Wall Street, we mean the world of money and investments, not a geographic area in downtown Manhattan - was supplemented by ignorance. Folks in the world of finance...
...problems - to sharply downgrade the firm's securities. That gave AIG no time to react, no time to raise more capital, no more time to do anything else but beg for help. Because AIG is in a much scarier situation than Lehman - the insurer has assets of $1 trillion, more than 70 million customers and intimate back-and-forth dealings with many of the world's biggest and most important financial firms - Uncle Sam felt that it had no choice but to intervene...
...failure of confidence by its far-flung customers. That reach was one of the key reasons why the U.S. government appeared to reluctantly agree to an AIG bailout on September 16 and stepped in to save the insurance giant, whose global balance sheet of assets and liabilities topped $1 trillion. "Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression," money manager Michael Lewitt wrote in the New York Times...
After establishing a supposed hard line against bailouts over the weekend with Lehman Brothers, the government abruptly abandoned it Tuesday and announced an $85 billion Federal Reserve loan to insurance giant AIG. The explanation: AIG was deemed too huge (its assets top $1 trillion), too global and too interconnected to fail...