AIG, Lehman Brothers, Merril Lynch & Washington Mutual Added to List of Failing Financial Giants

Well folks, it looks like we’ve reach a tipping point and it doesn’t feel very good for many people. It’s unfortunate that it has come to this level of failure, but there’s a reason that we are here. All of these companies refused to deal with their bad loans and shaky assets and bite the bullet. Instead of writing down all their bad loans and selling assets to improve their financial condition, they attempted to ride out the storm in the vain hope that conditions would change.

Now they are faced with too much debt, too little capital, and assets that are declining in value because everyone else is dumping assets at the same time.

The Financial Meltdown May Be Good for Real Estate

What’s happening today may be the turnaround point that we’ve been looking for. Central banks around the world have announced that they are making loans to banks in the neighborhood of $180 billion dollars. They are essentially loaning money to banks so that the banks can make loans to others.

The central banks NEED to do this. The problem with tight money is not the reluctance of banks to loan money, it is that the banks cannot borrow money to loan. Banks and other financial institutions borrow money from each other through many different debt instruments during normal times. Right now, banks and financial institutions do not trust each other enough to loan money. They are in effect saying that the other banks are not credit worthy.

Withdrawal and Treatment

This latest round of meltdowns is enough to get the Bush administration’s full attention. There can be no doubt that action is necessary. Loaning $85 billion to AIG makes me sick, but it is necessary. It’s also only the first of many more to come. The Bush administration will need to make money available to the banks in a high enough amount for them to make loans. It is expensive and hard to swallow, but we believe it’s necessary to get the economy going again.

The banks are going through massive withdrawal symptoms from years of excess borrowing and very bad choices, but without treatment, they will die. Unfortunately, they are taking big chunks of our economy with them. The treatment is harsh and expensive, but unless it’s given, recovery will take a very long time.

I hate government interference, but something has to give. I sell real estate in Daytona Beach so the availability of money for people to buy homes is important to me. But, this mess goes way beyond real estate. Thousands of small and mid-size businesses are unable to get loans to expand or even continue day to day operations. The banks will not make the loans because they can’t resell the loans in open markets. This is crippling the engine that drives this country. It’s not the giant corporations that employ most Americans. It’s small and mid-size companies. We cannot afford to lose that engine.

Silver Lining

We believe the latest crisis is a necessary step to cleaning up the financial mess. This could be exactly what we need for these companies to take necessary action, with government cooperation and support, to put and end to the mess.

Merrill Lynch sold to Bank of America because their leadership believed they could not remain viable. Other CEOs and Board of Directors need to take similar decisive action. If enough do, this crisis can end sooner. If, like Lehman, they continue their death march and refuse to act, the healing will take longer.

We believe the silver lining is that the situation is fully in the open and boards and government leaders will force action sooner than later. This is the beginning of the recovery, and, we hope, the low point of this financial mess.

You Can Buy a Home

Yes, you can buy a home. Money is available and people who have good credit and money down can buy a home. Homes in Daytona Beach are being financed everyday. Now, may be the peak of fear and panic and the best time to buy. If you are looking for the best buying situation for a long time, it’s here and you should start the process now.

Technorati Tags AIG, Daytona Beach Homes, Daytona Beach Real Estate, Financial Meltdown, Lehman, Merrill Lynch, real estate

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