It was an earth-shaking and event-moving fortnight to say the least. Indeed, 2008 may be known as the year when the financial landscape of Wall Street changed forever.

During this period, a massive US$700b package was proposed by the US government to remove toxic assets from the balance sheets of American financial institutions, following the bankruptcy of one investment bank and the near-collapse of several financial institutions, which triggered wide spread panic in the global stocks and commodity markets.

Staggering under the weight of more than US$613b of debt, Lehman Brothers, the century-old investment bank, initiated bankruptcy filing. Merrill Lynch flew into the embrace of Bank of America and American International Group (AIG) was bailed out to the tune of US$85b.

The remaining independent investment banks, Goldman Sachs and Morgan Stanley upgraded their status to bank holding companies, subjecting both institutions to greater oversight but allowing them to tap consumers’ deposits. At the same time, Mitsubishi UFJ Financial Group agreed to purchase a 20% stake in Morgan Stanley for up to US$8.5b.

The massive bailout coupled with billions of dollars pumped into the global financial system by international central banks restored some semblance of confidence to the tumultuous markets, although doubts have grown over the viability of the rescue package.

With the US financial turmoil taking centre stage, we turn our spotlight on the bailout of the century as well as the fall of Lehman Brothers. The bankruptcy of Lehman Brothers, while swift and drastic, has been in the making for years. Flip to page 8 for more information.

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