The Dow Jones Industrial Average fell 504 points today, its worst day since September 17, 2001.
Over the weekend, financial giant Lehman Brothers announced it would file for bankruptcy after all potential buyers gave up. The filing reflects Lehman Brothers is closing its doors with debt that exceeds $600 billion. The U.S. Treasury refused to provide the potential buyers any takeover aid, as it did when Bear Stearns crumbled a half-year ago and when it seized Fannie Mae and Freddie Mac earlier this month.
Bank of America, still trying to absorb the troubled mortgage lender Countrywide Financial, will buy Merrill Lynch. Merrill Lynch had been hit by tight credit markets and falling market values tied to its billions of dollars of mortgage-backed assets.
"Just the psychological impact of this kind of failure is going to be significant," said Samuel Hayes, professor emeritus at Harvard Business School. "It will color people's feelings about their well-being and the integrity of the financial system."
The world's largest insurance company, the American International Group Inc., is also expected to announce a major restruis asking the Federal Reserve for emergency funding and plans to announce a major restructuring today.
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