There is the saying that when America catches a cold, countries like Barbados are likely to catch a cold. While some Barbadians may feel insulated from what is happening in the US financial market, they are others who know better. Last weekend the world received the news that security firm Lehman Brothers had filed for bankruptcy, and that Bank of America had bailed the respected Merrill Lynch for approximately 50 billion dollars. Now that Lehman Brothers and Merrill Lynch have joined Bear Stearns on the financial dump, just two of the big five security firms are left standing in Goldman Sachs and Morgan Stanley.
As if the collapse of leading security firms on Wall Street is not bad enough, American International Group (AIG) is currently reported to be waiting on the Federal Reserve Bank to inject much need 40 billion in cash to offset massive credit losses. Barbadians maybe interested to know that AIG is the parent of ALICO which is an insurance subsidiary based in Barbados.
After watching the US networks and reading the many reports about the financial mess on Wall Street, it raises the question how could modern America with all of its smarts allow this to happen? It is being reported that the DOW dropped 500 points today. What this means is that many blue collar and middleclass Americans have seen their 401K, IRA, pension and other investments instruments drastically depreciate in value. Some financial analysts have put the positive spin on the meltdown by saying that it is a purging which is necessary to get rid of those institutions that have built their success on feather credit.
Barbadians should note that the stock markets around the world are inter-connected. Reports that the Asian stock markets have suffered a drop in points is instructive. The BU family would be aware that at the heart of the meltdown on Wall Street is the dumbing down of risks by large financial companies through the use of mortgage backed securities. It is all so complicated, BU family members should use google search to become educated on these matters. We are prepared to say that the financial wizards on Wall Street outsmarted themselves, and it was compounded by the regulators who nodded on the job.
There is concern in some quarters that the multi-million dollar real estate properties on the West Coast will be touched by the meltdown on Wall Street. Many of the investors who have been purchasing properties on the West Coast fit the profile of the Wall Street investor. The overnight reduction in the value of their personal fortunes held in stocks and shares will demand more financial prudence going forward.
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