Since my last post

Since my last post -

Lehman Brothers have filed for bankruptcy
AIG would have done down too if the US Govt. hadn't pumped them up with money
Merrill Lynch sold itself to Bank of America for $50 billion, much less than its actual value a few weeks ago
America's two biggest mortgage lenders are owned by the US Government
The US Congress is getting a $700 Billion package ready to take on people's bad mortgage assets
Goldman Sachs and Morgan Stanley turn into commercial banks
Of the 5 big independent investment banks that were alive in January 2008, only two remain, and like I said, they've turned to commercial banks
The 7 developed nations have pledged whatever investment is necessary to keep the economies from running into trouble
The Investment Banker's Wall Street as we know it is dead.

The artificial world that Wall Street had been living in and had been luring investors from all over the world seems to have been exposed as empty, and now we should see the trend of people going back to the real economy - investments made on deposits, a more stable, long term appetite for risk and yes, a lot smaller bonuses for our chaps on Wall Street.

There are a lot of rules that had to be rewritten to allow the government to bring stability into the market, from changing British monopoly laws to allow Barclays to buy HBOS, a mortgage lender. How the mighty have fallen. For the past many years, the US government, and its influential multinational corporations, have been forcing developing countries to open up their financial sector to allow these companies to bring in the kind of business they do at Wall Street, or rather, did at Wall Street. They were horrified that how could the government be ever involved in the financial markets - the government had no right to regulate the markets so minutely and should leave.

So the US government is now back in the saddle, owning the two biggest mortgage lenders, Freddie Mac and Fannie Mae, the Federal Reserve brokered the deal that allowed JP Morgan Chase to buy Bear Sterns, and the Government pumped billions to allow AIG to keep standing. And then the multi-billion dollar package that some call as a 'bailout', and some as necessary to keep the markets alive! 

What can I say, while the spate of bankruptcies is probably not over still, because this exotic securities, or as now they're called, toxic securities are in possession of a lot of companies, including ICICI, but fairly limited to $80 million. The artificiality of the markets will probably have to be flushed out, some semblence of order brought back in and it will take at least a few years before the markets really come out of this mess. Of course, I believe when the markets do come around, nobody will want to talk of toxic securities, they'll just be happy in trading in the ordinary, boring stocks that will give them less than half the return but have been surviving for many more years!