After recently bailing out the financially troubled mortgage giants Fannie Mae and Freddie Mac, and earlier salvaging Bear Stearns, the Federal Reserve said, “no,” to Lehman Brothers, the investment bank that filed Chapter 11 bankruptcy on Monday. Fed Chairman Ben Bernanke announced on Sunday that he will be meeting with Henry Paulson, secretary of the Treasury and Christopher Cox, chairman of the SEC, to see what steps will be taken to protect the global financial system. The aim, Bernanke said, was to identify “potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses. “The steps we are announcing today,” Bernanke continued, “along with significant commitments from the private sector, are intended to mitigate the potential risks and disruptions to markets.” Already, there are reports of layoffs at Lehman, the 158-year-old Wall Street fixture, and in the end, the terminations could affect 25,000 employees. This downturn happens in the wake of Bank of America’s buyout of Merrill Lynch for $44 billion. How this will impact the financial market overall is anyone’s guess, but the folks at Washington Mutual and AIG, also on the precipice of tumbling, wait apprehensively for the results of the several banks pooling their resources to offset the calamity. Treasury Secretary Paulson supported the Fed’s moves, observing that the actions taken should “strengthen and enhance our financial markets. These initiatives will be critical to facilitating liquid, smooth functioning markets and addressing potential concerns in the credit markets.” He also applauded the “orderliness and stability in our financial markets as we work through this extraordinary environment.” Meanwhile, Cox, the chairman of the Securities and Exchange Commission, issued a statement saying the customers of Lehman’s broker-dealer operations “will not be adversely affected by recent market events.” Some nervous workers and investors, worried about their pensions and retirement funds, have been assured by managers at Lehman’s that all is well, at least for the moment. Sen. Barack Obama, the Democratic presidential nominee, voiced his disgust at the developments. “This country can’t afford another four years of this failed philosophy,” he said before departing on a Midwest campaign tour. “Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle- class Americans have brought us to the most serious financial crisis since the Great Depression. I certainly don’t fault Sen. McCain for these problems, but I do fault the economic philosophy he subscribes to.” Sen. John McCain fired back, telling his supporters that the basic U.S. economy was stronger than Obama suggested and vowed to reform the way Wall Street does business to prevent future problems in the financial sector. “There’s been tremendous turmoil in our financial markets, and Wall Street and…people are frightened by these events,” McCain said. “Our economy, I think, still the fundamentals of our economy are strong. But these are very, very difficult times. And I promise you, we will never put America in this position again. We will clean up Wall Street.We will re-reform government.” When it comes to blame, many experts point at the sub-

prime mortgage crash as the main culprit, though others point to unscrupulous speculators. Whoever is to blame, taxpayers can for the moment exhale, since the Fed has temporarily ended bailing out failed financial companies. But that’s just for the moment. In a related developments, hours after Governor David Paterson announced on Tuesday from Albany that he had given special permission to the American International Group, Inc., the nation’s largest insurer by assets, to access $20 billion of capital in its subsidiaries, the Federal Reserve stepped up to the plate. At first hesitant to rescue another failing institution–it had already recently bailed out Fannie Mae and Freddie Mac, and earlier, Bear Stearns–the Fed changed its mind and will lend AIG $85 billion to finance the company’s liquidation over the next couple of years. This is the largest single financial intervention in the nation’s history. “Wall Street’s continuing problems should serve as a stark reminder that this recession is far from over. New York State has taken the first step toward helping to stabilize AIG, which is otherwise a very healthy company,” Paterson said. “On a state level, we were able to reach a market-based solution that will stabilize AIG at no cost to New York taxpayers. Policyholders should also know that they are safe, and their insurance policies are still good. AIG’s insurance companies are financially strong, and the Insurance Department will continue to ensure that they remain strong.”