Recent Crisis

Wall Street is shaking. After Fannie Mae and Freddie Mac, On September 17, 2008 Lehman Brothers has filed Chapter 11. Bank of America, the one who wanted to buy Lehman Bro. has switched their interest and buy Merril Lynch instead. An investment bank with 158 years of history went bankcrupt because of subprime case. And the crisis keep marching. AIG is also in trouble. And because of its possible systemic cause, the US government bail it out for $85 billion. Much bigger than Indonesian forex reserves. On 19th of Sept 2008, The Fed and US Treasury has proposed a comprehensive way out of this crisis with the cost of about $700 billion to buy all assets that is necessary, incl. mortgages and mortgages linked securities with high risk and problems. Because of this, Dow JOnes bounce back from 10,000 level to 11,000 level on Friday, 19 Sept 08. On the other hand, this $700 billion bail out will cause US Deficit to increase to $11.3 trilion, and this issue has caused Dow Jones falling back 300 points... Investors are flying to quality, and T-Bills has been over demand, and the yield has gone negative... amazing...