Last Bank Standing
Who will be Last Bank Standing?
For the second Sunday in a row two high profile competitors were dumped from the Wall Street reality show ‘Last Bank Standing’. First, the 158-year-old Lehman Brothers were thrown out when they lost support and then collapsed. The bank had turned assets of £388 billion and annual profits of £3.3 billion into debts of £370 billion and a nine month loss of £3.5 billion*.
Then another strong contender, Merrill Lynch, 94, was swallowed by its younger rival from North Carolina, Bank of America. A sum of money around £28 billion is reported to have changed hands to persuade Bank of America to take over Merrill Lynch’s near trillion dollar liabilities.
This weekend’s sensational episode eclipsed even the drama of last Sunday’s show when the world’s biggest mortgage institutions – competing as the double act Fannie Mae and Freddie Mac – were captured by Federal Reserve, the one government act in the competition and the only player able to underwrite the pair who between them guarantee £2.9 trillion of mortgage debt.
After Sunday’s show had ended it was revealed that AIG – once the world’s biggest insurer but who has now lost £10 billion in nine months by dabbling in banking business – is desperately trying to stay in the game by borrowing more than £30 billion. But that was not enough to keep the votes of investors and on Tuesday night Federal Reserve stepped in and effectively bought the company – which has a trillion dollars of assets – for £48 billion.
Last March the big beast Bear Stearns, which had earlier won the coveted title ‘most admired’ firm in its class, disappeared after being felled by a knockdown price from rival JP Morgan Chase. The £14 billion bank sold itself for £157 million later raised to £785 million when Federal Reserve called ‘foul’.
After the recent carnage there is disharmony among the backers of the show who claim competitors are banking on notes that are far too risky as they struggle to shine. The show’s regulators have been accused of failing to spot these bum notes early enough and of ignoring calls to bring them back in tune. The regulators say their pitch was masked by too much creativity in the accounts.
Analysts fear that unless major changes are implemented the coveted title of Last Bank Standing will inevitably go to Federal Reserve.
*All prices converted at current rates of £1 = $1.78.
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