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An omen of financial disaster hangs heavy

Maswood Alam Khan
***Just the other day Hurricane Ike pounded Texas, leaving behind floods, power outage and large-scale damage to lives, homes and properties. The hurricane, according to some soothsayers, seems to portend that things are not going to be well in America and the rest of the world. An air of gloom and despondency seems to be haunting the whole financial world.***
A young man while studying in Kellogg in USA or in Rotman in Canada -- two famous schools of business management in North America -- knits a cocoon of dreams of working in prestigious investment banks like IP Morgan Chase & Co. or Merrill Lynch.
But, with 158 year old Lehman Brothers, one of the world's biggest investment banks, filing for bankruptcy, Bank of America buying Merrill Lynch, another giant of investment banking and American International Group (AIG), the world's largest insurance company, panting to be shored up, a student of commerce will now hesitate to knock at the door of a finance house for a job.
These three events centring three giants -- Lehman Brothers, Merrill Lynch and AIG -arc, without exaggeration, the biggest Wall Street headlines in a decade.
Bank of America, the second-
largest US bank, with Merrill in its possession will now turn out to be the top US bank and will likely put 24,000 of Merrill's 60,000 non-broker employees worldwide out of work. That, combined with Lehman's approximately 26,000 workers out of jobs, will send major shockwaves through the job markets.
Global outplacement firm Challenger, Gray & Christmas said on Monday that the US financial sector has shed nearly 103,000 jobs this year, and could now surpass the record 153,105 job cuts announced in 2007.
Just the other day Hurricane Ike pounded Texas, leaving behind floods, power outage and large-scale damage to lives, homes and properties. The hurricane, according to some soothsayers, seems to portend that things are not going to be well in America and the rest of the world. An air of gloom and despondency seems to be haunting the whole financial world.
Lehman Brothers' filing for bankruptcy is one of the worst
banking collapses in histo^. Allan Greenspan, the former chairman of the US Federal Reserve, said that this was a once in a half century, probably once in a century, type of event. He added: "We will see other major firms fail."
New York Governor David Paterson predicted that Wall Street might lay off 30,000 workers in a worst-case scenario because of the problems at big financial firms that began with sub-prime mortgages.
Lehman is the latest financial butterfly to flap its wings, and its sudden fall will have ripple effects throughout the entire world of finance. Lehman's bankruptcy filing is the latest symptom of how sick the financial institutions in America are and illustrates just how intertwined the global economy actually is.
Financial commentators are blaming Lehman Brothers CEO Richard Fuld's hubris, with a big dose of bad luck, for the institution's fall from grace. Until June, it had never even reported a quar-
terly loss as a public company. In 2007, the bank's net profit had risen 5% to a record $ 4.2 billion. For years this bank had been doing roaring business in originating mortgages, repackaging them and sellingthem onto other investors.
As the US housing market went from boom to bust the bank was too heavy with toxic housing loans to unload. The greatest blunder Fuld committed was when he missed a chance last August to sell a 25% stake in the bank for $ 4 billion to S 6 billion to Korean Development Bank.
What started as the admirable goal of helping people own their own homes ended up as housing
bubble that encouraged financial institutions -- big and small -- to take on unprecedented risks, a process that is now felling towering and venerable financial institutions to the ground -- boding a bleak future for the whole world.
2008 has witnessed several high-profile failures or near-failurcs in the US: Bear Stearns, Indy Mac, Freddie Mac, and now Lehman Brothers. The Federal Deposit Insurance Corporation (FDIC) -- an institution that provides deposit insurance guaranteeing safety of checking and savings deposits in member banks --increased its "problem bank" list
by 30% last quarter. There are now 117 banks on that list, totalling $78 billion in assets.
The US Federal Reserve and major banks have already announced steps to mitigate market volatility, and financial gurus are eagerly waiting to hear what the US central bank, in other words the US Federal Reserve, announces on Tuesday. A cut in interest rate may be a measure the Fed may take to perk up confidence of the puzzled and confused stakeholders.
The world is face to face with a great turning point in the next few days, as three major brokers of tire world have now disappeared from the scene. There will be winners and losers, and only those who are fittest and trustworthy will ultimately survive as the US government can't and won't bail out every sick institution as it did with Bear Stearns.
If Hurricane Ike's lashing of the American coast and Lehman Brothers' sad demise in the latest financial tsunami hitting the Wall Street augur that a recession is going to hit the world anytime soon, it is time for all of us to be braced for cataclysmic events like the ones that once hit the world in the 1930s.
Maswood Alam Khan is Genoral Manager. Bangladesh Krishi Bank E-