Backgrounder: Lehman Brothers Holdings Inc.

Backgrounder: Merrill Lynch & Company Inc.

    BEIJING, Sept. 16 (Xinhuanet) -- The dramatic downward spiral events in New York continued to reshape the global financial system as major markets in America, Asia and Europe dropped sharply on Tuesday.

    The seismic shake-up on the global markets all came after the fourth largest U.S. investment bank Lehman Brothers filed for bankruptcy and Merrill Lynch fled into the arms of Bank of America.

Traders work on the floor of the New York Stock Exchange on Sept. 15, 2008 in New York City. (Xinhua/Reuters Photo) Photo Gallery>>>

    The news sent shock waves across the world's stocks. Wall Street on Monday local time dropped precipitously with the Dow Jones falling more than 504 points, or 4.4 percent, to 10,917, which is its steepest point drop since the market reopened following the Sept. 11, 2001 attacks.

    In Europe, the FTSE index was down 2.72 percent in London, the Paris CAC-40 was off 3.52 percent and Germany's DAX 30 index of blue chips sagged 2.99 percent. Meanwhile in Russia, the MICEX index was down 6.2 percent and RTS index was 4.8 percent lower.

    Japan's benchmark Nikkei 225 stock index plunged 4.8 percent to 11,632.99, falling under the 12,000-point level for the first time since mid-March.

    Chinese Hong Kong's stock index tumbles 6.49 percent in early trade, while South Korea's Kospi shed 6.2 percent, and Chinese Taiwan's benchmark was off 4.6 percent.

    But, according to a CNN report, the situation in Australia and New Zealand was not as severe as others, with key indices down 2.4 percent and 2.7 percent respectively.

    Lehman Brothers, the fourth biggest U.S. investment bank, filed for bankruptcy Monday after two most serious buyers Barcklays and Bank of America (BOA) withdrew from talks to buy the firm. New York-based Lehman has lost 94 percent of its market value this year after record losses from investments tied to mortgages.

    Meanwhile, Lehman's rival, the third largest U.S. investment bank Merrill Lynch reached a 50-billion-dollar deal to sell itself to BOA under the pressure of regulators. Shares of Merrill Lynch tumbled more than 35 percent last week and closed at 17.05 dollars last Friday.

Trader Jeff Feldman works in the S&P 500 pit at the Chicago Mercantile Exchange, Sept. 15, 2008.(Xinhua/Reuters Photo) Photo Gallery>>>

    American International Group (AIG), the largest U.S. insurer, is another big financial giant affected by the Lehman. AIG refused private equity infusion and turned to the Federal Reserve for help. The New York Federal Reserve held meetings on Monday on the situation AIG with representatives of the Treasury Department, financial services firms and state officials. AIG's shares tumbled nearly 50 percent in morning trading.

    Three of five largest U.S. investment banks failed within six months, including Bear Stearns, Lehman Brothers and Merrill Lynch. These historic events triggered panic among investors about another series of troubles for banks and financial institutions that may be forced to further write down debt assets. 

    "In the short term, we are looking at a fresh wave of weakness hitting financial markets," said Chloe Magnier, chief economist at Saxo Bank in Paris. "I'm not optimistic about the coming months."

    Lorraine Tan, director at Standard & Poor's equity research in Singapore, suggested the shake-up was needed to restore confidence in the markets.

    "A lot of people are getting burned," Tan said. "It's better to get this out of the system. Hopefully for the U.S. this could be it as far as potential failures of investment banks."

    (Agencies)

Wall Street plunges amid U.S. financial crisis

    NEW YORK, Sept. 15 (Xinhua) -- New York stocks made landslide losses on Monday with Dow Jones shedding more than 500 points, as the U.S. financial turmoil battered investors' confidence in the health of economy.

    Lehman Brothers, the fourth biggest U.S. investment bank, filed for bankruptcy Monday after two most serious buyers Barcklays and Bank of America (BOA) withdrew from talks to buy the firm. New York-based Lehman, the biggest U.S. underwriter of mortgage securities, has lost 94 percent of its market value this year after record losses from investments tied to mortgages. Full story

Lehman Brothers nears bankruptcy as buyers quit 

    NEW YORK, Sept. 14 (Xinhua) -- The fourth largest U.S. investment bank, Lehman Brothers Holdings Inc., prepared to file for bankruptcy Sunday after Barclays PLC and Bank of America Corp. (BOA) pulled out from talks to buy the firm.

    Barclays, the U.K.'s third biggest bank, and the BOA withdrew as they could not get guarantees from the government or other Wall Street firms to protect against potential losses on Lehman's assets. Full story

Bank of America acquires Merrill for $44 billion

    NEW YORK, Sept. 14 (Xinhua) -- Merrill Lynch & Co., the third largest U.S. investment bank, agreed late Sunday to sell itself to Bank of America Corp. for roughly 44 billion U.S. dollars.

    According to the deal, Bank of America will pay 29 dollars per share for the 94-year-old Merrill Lynch, which is 70 percent premium above Merrill's Friday close at 17.05 dollars per share. However, the offer is only two-thirds of Merrill's value of one year ago, and half its all-time peak value of early 2007. Full story

New York allows AIG to use $20 bln subsidiaries

    NEW YORK, Sept. 15 (Xinhua) -- World's top insurer American International Group (AIG) would be allowed to use 20 billion U.S. dollars of its subsidiary company assets to stay in business, New York Governor David Paterson announced here Monday.

    Paterson said New York state officials have reached a deal that would allow AIG to access 20 billion dollars of its own capital by shifting funds from insurance subsidiaries to the parent company. And they have also asked the U.S. federal government to provide additional funding to AIG. Full story

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