"Extraordinary events" on Wall Street as two more large banks cease trading.
Two top Wall Street banks are to cease trading, in an extraordinary turn of events which could have dire implications for the global economy.
Lehman Brothers, an investment bank which has been operational for the past 158 years, has declared section 11 bankruptcy, and will now have its assets sold on the open market. Meanwhile, 94-year-old Merrill Lynch is to merge with larger rival Bank of America in a £25 billion deal.
The stunning collapses have occurred due to investors' worries over the firms' liquidity, or in other words, the amount of cash they had instant access to. These concerns, which led to both banks facing severe loss of share value over the last week's trading, have come about due to the credit crunch.
Lehman and Merrill were both heavily exposed to complex financial instruments which were connected with the property market. Therefore, last year's house price crash in America, and the onset of the crunch, left them with huge amounts of devalued assets on their books.
The US government, for its part, signalled last week that it would be unwilling to step in and offer a bailout to Lehman, due in part to the political fallout which accompanied its rescue of investment bank Bear Stearns in March. Campaigners had criticised the Treasury and the central bank, the Federal Reserve, for spending too much public money on putting right a private firm's mistakes.
Lehman's collapse in particular could have global ramifications, with investors continuing to lose confidence in the financial sector and more banks being pushed towards bankruptcy as a consequence.
Speaking to the New York Times Peter G Peterson, co-founder of the private equity firm the Blackstone Group, commented: "My goodness. I've been in the business 35 years, and these are the most extraordinary events I've ever seen."
