Midnight Economic Outlook

While things could change very quickly between now and tomorrow morning (well, this morning), things still don’t look up. Even after digesting Lehman’s Chapter 11 filing and Merryl’s sale, AIG still remains in bad shape and the futures market for the DOW tomorrow remains bearish. What is so frightening is that although Lehman was a big names on Wall Street, AIG is not just a big name- it’s a behemoth. It has over one TRILLION dollars in total assets (compared to Lehman’s paltry $600 billion). Its failure would probably be worse than the Lehman collapse due to the level of exposure all the other major banks have to AIG. In the words of BofA’s Chairman (the only bank that seems to have any money these days):

`I don’t know of a major bank that doesn’t have some significant exposure to AIG,” said Kenneth Lewis, chief executive officer of Bank of America Corp., in a CNBC interview. An AIG collapse would “be a much bigger problem than most that we’ve looked at.”

That is, if AIG goes under, every other major bank will have to deal with assets that may be worthless in the wake of the collapse.

Of course, in addition to viewing the potential failure of AIG as a macro problem we also must consider those closer to us. I truly hope they pull through.


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