Just as the financial crisis resulting from the burst of the U.S. housing bubble appeared to have peaked, 158-year-old investment bank Lehman Brothers has collapsed and Merrill Lynch has agreed to be taken over by Bank of America Corp. Meanwhile, two days after U.S. authorities refused to bail out Lehman Brothers, the U.S. Federal Reserve has agreed to lend up to $85 billion to American Insurance Group for two years in exchange for a 79.9 percent equity stake.
After the housing-bubble burst surfaced in the summer of 2007, the U.S. government in March played a pivotal role in the sale of Bear Sterns Cos., a leading investment bank, to J.P. Morgan & Co. and then recently decided to take over the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
The disappearance of three of the top five U.S. investment banks within a half year, and now the tumble of major stock markets and the U.S. dollar, have plunged world financial markets into commotion, seriously threatening the U.S., European, Japanese and other economies.