Wednesday, September 17, 2008

History provides little comfort

In the Financial Times, September 16 2008, historian, Harold James, tells us:

"The drama of the past days – the collapse of Lehman Brothers, the rapid purchase of Merrill Lynch, the weakness of AIG, the threats to other institutions – all have no real historical precedent."

Is this an issue of liquidity or solvency?

1 comment:

Luke Flanagan said...

I believe this is a problem of Solvency. This is where your capital is all dried up and where you are holding more in liabilites than in assets. This is a very risky way to run any type of business. Even if youre a company that is "too large to fail" and the government will bail you out of situations, that is still no excuse to be running your business like this!

These business became insolvent which means it can no longer operate and is undergoing bankruptcy.

This was the bigger issue!