Reading about the devaluation of Lehman brothers, and the losses in security for their staff and shareholders i feel a real sadness for the illusions shattered, the plans dashed on the rocks of financial reality. How will they recover their salary and what happens to their pensions which might well be tied into the value of the firm.
Yet am i correct to be sympathetic here? Are there not better deserving causes and is it really not their fault anyway?
And what about the surrounding economy? Will the US Government bail out Lehmans? This quote is from the USA site for Yahoo:
If Bear Stearns went under, it could have dragged down a web of firms with which it did financial business. Fannie and Freddie together own or guarantee half the nation's mortgages. Their failure could have caused the flow of mortgage money in the US to freeze up.
But if these firms qualify for help, so might Lehman, as well as other financial institutions battered by the housing crisis, such as Washington Mutual, the nation's largest savings and loan.
Our recent holiday up in the College Valley was spent, when the rains were pouring down reading that excellent book by Nassim Nicholas Taleb called the Black Swan. There were several key points to come out of the book:-
- Our inability to account for the unpredictable.
- How banks can make money year after year ...and then in just one year lose more than all the previous profits.
- How the cycle keeps on repeating itself.
So as i sit here, on a cold and rainy night thinking about the financial mess and what is still to come i can't help but think that there is nothing new under the sun and maybe i better head off to that well deserved holiday in central portugal :-)
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