Why did the US government abandon Lehman while arranging for quick bailout packages for AIG, Citi and the likes?

The collapse of Lehman Brothers and its fallout
The global financial markets were worst hit post the fall of the Lehman Brothers. On September 15, 2008, Lehman Brothers filed for Chapter 11 bankruptcy protection, giving the worst blow to the economic confidence level. The company's besetting sin was its large positions in subprime and other lower-rated mortgage-backed securities, which saw huge losses accrue throughout 2008. Another factor that did Lehman in was over leveraging, which was beyond 30 times at the time of their declaring bankruptcy. This leaves a question : Why did the government abandon Lehman while arranging for quick bailout packages for AIG, Citi and the likes? Why the government chose to merely remain a mute spectator just watching the company meet its unfortunate fate? This thought was resounded when several lawmakers asked why the government stepped in to help insurance company American International Group (AIG). As a reply to this Richard Fuld, the disgraced head of Lehman Brothers, said, "Until the day they put me in the ground I will wonder. I do not know why we were the only one that was not rescued". According to him, regulators knew the full scale of its condition and knew how it was pricing its distressed assets in the months prior to its bankruptcy.

Indeed, this is question, which will forever haunt the financial world!!!

" The world before Lehman and world after Lehman is totally different. The world before Lehman was based on the trust and confidence that banks don’t fail. The world after Lehman raises doubts that even banks can fail."

Reference: Magazine wealth compass february 2009 issue

Lessons from this downturn due to global meltdown

1. Markets are all about greed and fear.

2. We have to live the markets, literally 24/7/365. We have to be extremely alert.

3. There are a few good years and a few bad years in the markets and nothing will keep perpetually going up or going down.

4. The businesses are cyclical and environment is cyclical and after every up, there will be a down. We need to be prepared for the upside as well as the downside.

The industry must quickly learn its lessons from the crisis and find ways to ‘reassure customers’.

Keynes theory: proving to be so true in this period of slowdown!!

Our economics teacher of 2nd semester Ms Renu Verma was so fond of Keynes, in every situation she would introduce Mr. Keynes in the lecture and say, " You can bring the horse to water but never force it to drink it".
This theory has become so relevant when linked to the current financial situation.The research work done by this economist in 1930s is applicable !! Hats Off to you sir..... The theory propounded by John Maynard Keynes, popularly known as the Keynesian Theory, serves as a foundation for the modern economics. The great Depression period which began in 1929 left the government yearning for more study in the field of Macroeconomics. Mr. Keynes, in his magnum opus 'General Theory of Employment, Interest and Money' published in 1936 suggested that subject to certain assumptions, level of equilibrium at full employment could be reached only with the deliberate intervention of the governments. What Keynes advocated was to introduce Government Expenditures to overcome the shortages in aggregate demand to achieve the level of full employment in an economy. He strongly professed Government intervention through fiscal policy measures to solve the problem of unemployment and stabilise the economy. The theory states that in order to reach the level of full employment, the government must increase its spending to generate employment opportunities in the nation. This would lead to income generation which would stimulate the consumption demand thus balancing the demand and supply at the full employment level. To attain this purpose, the government can use the fiscal and monetary policies as weapons to control the activities in the economy.

Hence, the governments across the world have made efforts to infuse liquidity directly into the systems by means of economic stimulus packages.

A link describing US Economy situation!!

Hey people. check out this link

www.usdebtclock.org

Is there any relation between stock market success and your intelligence quotient?

What are some of the character traits of people who have a high I.Q.?
1. Quick on the uptake - ability to grasp new concepts faster
2. Curiosity - eager to learn and try new things
3. Out-of-the-box thinking - looking for alternative and unconventional solutions - the story of how Columbus made an egg stand on a table without spilling its contents comes to mind;
4. Inability to concentrate on routine or boring tasks
5. Intolerant towards those who can't or won't follow their arguments and advice
You may not agree about some of these traits, or, may think of other characteristics that apply better.
The point is, the above traits of a high I.Q. person are not conducive to achieving fame and fortune in the stock market. The most well-known example is that of Sir Isaac Newton, discoveror of Gravity and the Laws of Motion. He lost his shirt by investing in stocks.
People with high I.Q. excel in fields like science, mathematics, economics, engineering. There are set formulae with predictable results. Stock market investments don't work as per formulae. Even detailed analysis may lead to wrong choice of a stock. Unforeseen things happen. It is part of the game.
Intelligent people find this difficult to accept. They are accustomed to success, not failure. Their ego gets in the way - "How can I be wrong?" So, they hang on to their shares, convinced that the market is wrong and the share price will soon hit the roof.
When it dawns on them that they are still losing money, they try to think of 'smarter' alternatives, like 'hedges', 'averaging down' and 'puts'. A bad situation gets worse.
The attitude of a sales person works better in the stock market. Failure and success are accepted with equanimity. He may not be very bright, but has learned to be diligent in regularly updating his prospects list.
When one door gets shut on his face, he just moves on to the next prospect on the list. When he makes a sale, he is pleased but not elated. Each day is the same as the day before. Routine work. Not very creative. But a plan of action that works and meets targets.
That was the long answer. The short answer?

Stock market success and high I.Q. tend to be inversely proportional.

WELCOME!!

THIS IS THE BLOG OF FINNACLE-2009 BATCH: A VIRTUAL ASSET MANAGEMENT COMPANY.
Blog is a kind of online journalism where one can talk about notes, ideas and discuss events.
This blog is a place where all the members can post their experiences and any useful link/article they find ,which is worth sharing.