“..In the biggest reshaping of the financial industry since the Great Depression, two of Wall Street’s most storied firms, Merrill Lynch & Co. and Lehman Brothers Holdings Inc., headed toward extinction.
New York-based Lehman, founded 158 years ago, said early today that it filed for Chapter 11 bankruptcy protection after failing to find a buyer.
Merrill Lynch, 94 years old and also based in New York, agreed to sell itself to Bank of America Corp. for $50 billion in an emergency deal hashed out yesterday.
“The tectonic plates beneath the world financial system are shifting, and there is going to be a new financial world order that will be born of this,” said Peter Kenny, managing director at Knight Capital Group Inc., the Jersey City, New Jersey-based brokerage that handles about $1 trillion worth of stock transactions a quarter. `
`It’s an ugly and painful process.”
The engines that powered record growth in the financial industry over the last decade — cheap credit and surging property values —
– have been thrust into reverse.
..Companies that once thrived on making real estate loans and holding assets bought with borrowed money are now under siege..
..giving the upper hand to those less reliant on leverage and holding the fewest assets tied to property.
The industry convulsions that started last year have already eliminated Bear Stearns Cos., forced into a cut-price sale to JPMorgan Chase & Co. with government support in March.
A week ago, the U.S. Treasury placed mortgage companies Fannie Mae and Freddie Mac into conservatorship, guaranteeing their widely held debt securities while all but erasing their equity value.
American International Group Inc., once the world’s largest insurer, is struggling to raise cash to avoid a credit-rating downgrade that could cripple its business.
From Five to Two
The five New York-based securities firms that dominated Wall Street have been reduced to two: Goldman Sachs Group Inc. and Morgan Stanley.
While both firms are scheduled to report a drop in third-quarter earnings this year, their business has remained profitable throughout 2008 — unlike Lehman and Merrill.
“I think highly of Morgan Stanley and Goldman Sachs, so I expect them to ride this out,” Evercore Partners Inc. Chief Executive Officer and Former Deputy Treasury Secretary Roger Altman said in an interview on CNBC. `
`But as to whether we’ve seen the last of this crisis, I think the answer to that is clearly no.
And exactly where it goes from here and how it unfolds..
..I’m unsure.”
go to source/story>> `Tectonic’ Shift on Wall Street as Lehman Fails, Merrill Sold : Information Clearing House – ICH
