Lehman Brothers chain reaction

A very interesting post and good insight into how screwed every economy in the world is. Nobody is safe!

Lehman Brothers closes shop

Three things happened this week that really show us why the current financial crises are so interconnected — with implications that will reach all corners of the market to affect us all — and at the same time so difficult to solve:

Let’s start with the bankruptcy of Lehman Brothers. The Wall Street bank had many liabilities that were insured. Even the rent on its London offices was insured against nonpayment.

The insurance company behind this was AIG. AIG also insures lots of other dodgy risks around the world. And found that its own balance sheet was in deep trouble because of it. AIG has now been bailed out by the U.S. Federal Reserve which now owns the company.

So now AIG must slowly begin to sell off its assets to pay back the loans. One of its most profitable assets is ILFC — the aircraft leasing company. ILFC is also the largest buyer of planes in the world and has more than 150 Boeing and Aircraft aircraft on order

Both plane makers are already struggling. Boeing has industrial strife and problems with its 787 Dreamliner. Airbus has also had problems with its A380 superjumbo and is enduring major restructuring headaches.

With both already reeling, cutbacks from ILFC could take their toll. Airlines will pay more for aircraft leases, some carriers will go out of business, with further job losses and passengers will pay higher fares.

From banks, to insurance, to leasing companies, to plane makers, to airlines, to travel agents, to hotel workers to you and me — workers in growing number of industries will feel the effect.
The connections just keep going on.

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  1. #1 by kumar on October 18, 2008 - 12:06 pm

    This post really scares me ! 😦

  2. #2 by Frases de amor on May 22, 2012 - 12:33 am

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