Market Commentary from WH Cornerstone Investments
History is repeating itself!
Lehman was the largest bankruptcy in our
country's history. It was larger than the
previous nine largest combined; it was just a
few weeks ago, now it's a passing thought.
The news keeps coming out faster than Wall
Street can digest it. Wall Street doesn't
like uncertainty. We are feeling the effects
of that now.
Back in the late 80s and early 90s there was
plenty of scandalous news. You might remember
some of these stories.
- The crisis of the Savings and Loans (S&L)
- Ivan Boesky-prosecuted for insider
- Salomon Brothers-caught submitting false
bids to the U.S. Treasury. Their story is
documented in Michael Lewis' book-Liar's
- Drexel Burnham Lambert-driven into
bankruptcy in the 1980s by its involvement in
illegal activities in the junk bond market,
driven by Drexel employee Michael Milken.
- Michel Milken a.k.a. "Junk Bond
King"-Drexel employee who was sent to prison
on finance-related charges.
These stories dominated the crisis of that
day. This current mess is a re-occurring
nightmare from the past. The names might have
changed, but the greed hasn't.
From 1986 to 1995, the number of US federally
insured S&L in the United States declined
from 3,234 to 1,645-a 50% decline.
it was due to unsound real estate lending.
Many other banks failed for other reasons.
Between 1980 and 1994 more than 1,600 banks
insured by the Federal Deposit Insurance
Corporation (FDIC) were closed or received
FDIC financial assistance.
During the S&L crisis, the government created
the Resolution Trust Corp. Now, they want to
form the "Resolution Trust Bank". A
structure that will buy illiquid assets,
mainly mortgage related, to create liquidity
within the system.
We are fortunate to have Ben Bernanke, a
scholar of the 1930s and the Great
Depression, as well as Henry Paulson, one of
Wall Street's most respected leaders, at the
helm of this crisis. Even though the
politics of the day voted down yesterday's
plan, we'll eventually see a workable plan.
Even through all of this, our nation, economy
and capital markets have survived. Even
We have seen a breakdown of this magnitude
before. We will get through this one.
Please advise us promptly if there are ever
any changes in your financial situation or
investment objectives. Feel free to give us
a call if you want to discuss anything
Sincerely, Paula and Bill Harris, CFP