ON THE BRINK
Cyril Josh Barker | 4/12/2011, 4:34 p.m.
On Wednesday, Barclays announced it would buy Lehman Brothers for $2 billion. The British bank's purchase would save about 9,000 jobs, according to reports. Lehman Brothers' bankruptcy hearing began on Tuesday. CEO Richard Flud is set to testify before the House Oversight and Government Reform committee on September 25. With a tight deadline, AIG received a break from the federal government with an $85 billion emergency loan Tuesday night. The loan is in exchange for a 79.9 percent stake in the company. The emergency loan was provided to the company to avoid further damage to the economy and financial markets. AIG has 24 months to pay back the loan. In a statement Gov. Paterson said, "The deal that we have struck to stabilize AIG is the result of hard work and cooperation among officials from AIG, our own Insurance Department in New York, the Federal Reserve, the U.S. Treasury Department and others. We should all be grateful for the leadership they have all shown in recent days to bring us to this unprecedented development." In what was being called one of the biggest financial crises since the days following 9/11,global financial services firm Lehman Brothers announced on Monday that it would file Chapter 11 bankruptcy protection. The move comes after failed attempts to sell the company to Barclays or Bank of America or generate help from the federal governent. The situation will soon send ripple affects throughout the economy as a result of the massive job losses. "The board of directors of Lehman Brothers Holdings Inc. (LBHI) authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value," the company said in statement. "In conjunction with the filing, LBHI intends to file a variety of first-day motions that will allow it to continue to manage operations in the ordinary course. Those motions include requests to make wage and salary payments and continue other benefits to its employees." As of Tuesday the 158-year-old firm said that none of the broker-dealer subsidiaries or
other subsidiaries of Lehman Brothers Holdings Inc. was included in the Chapter 11 filing and all of the U.S.-registered broker-dealers will continue to operate. The company is exploring the sale of its broker-deal operations. Lehman Brothers' bankruptcy comes on the heels of two other corporations headed
for turmoil. Also this week, Bank of America announced talks to save Merrill Lynch for almost $40 billion. AIG is also in danger of going bankrupt unless it can find billions of dollars to pay its debts. With a bank debt of $613 billion, $155 billion in bond debt and assets worth $639 billion, Lehman Brothers' bankruptcy caused the Dow Jones to shed 500 points on Tuesday. The scene at the company's Times Square headquarters was hectic and crowed with swarms of media and employees on the street. The scene
also made way for protesters who advocated that Lehman Brothers' failure was the start of a major financial disaster. Mayor Michael Bloomberg held press conference to address the issue, along with