Niveshak October Issue

Wednesday, October 1, 2008 , Posted by Team Niveshak at Wednesday, October 01, 2008

Some events leave their mark on the history of finance and change the rules of the game forever. With stunning speed all the investments banks of Wall Street, the most formidable names in the world of finance, have faded into history. When Lehman Brothers suffered the ignominy of filing the biggest ever chapter-11 bankruptcy, Merrill Lynch disappeared into the embrace of Bank of America in a $50-billion stock deal ,Goldman Sachs and Morgan Stanley swallowed their pride to convert themselves into old-fashioned retail commer¬cial banks, the world watched with shock and horror as the Wall Street got completely wiped out of the species of its standalone I-Banks. Another I-Bank of Wall Street - Bear Stearns had already been sold out to JP Morgan Chase in February 2008. The world of high finance had been turned upside down. If this was not enough, AIG, the largest insurance company of USA got nationalized and Washington Mutual, the largest savings and loan institution and the fourth largest bank in USA was acquired cheaply by JP Morgan Chase in a flash.

These were no ordinary firms. They represented the pride of America’s financial system. They attracted the brightest from the top business schools. They were held up as models of good management, producing returns on eq¬uity that were the envy of their counterparts across all sectors. But suddenly, the Sub-Prime crisis taught them the basics of investment in the hard way.

Hounded by unforgiving investors and ruthless short sellers, they realised that their bets and investments made over the years have gone horribly wrong. For them, it’s now time to walk the long, less glittery road with a bunch of stodgy commercial bankers, who had to work a lot more to earn the same bo¬nus. It’s just not the end of an era or the demise of a lifestyle. It’s much more: It will not only change Wall Street forever, but could also see the Manhat¬tan elite slowly losing the reins of global finance to Asians and Europeans.

We analyse each of the failing financial institution, their global standing before the fail¬ure, their exposure to sub-prime debt, what went wrong, how they failed and what would be the possible implications on the world of finance.

Wall Street, they say, reinvents itself every few decades. This time round it’s not so much reinvention as disappearance. Some say Wall Street will never be the same again.Lets find out...

Team Niveshak

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