Banking News Roils Markets - Black Enterprise
Black Enterprise Magazine September/October 2018 Issue

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globalcommerceAs Wall Street ponders the effects of the Lehman Brothers Holdings Inc.’s bankruptcy and Bank of America Corp.’s acquisition of Merrill Lynch & Co. investors are wondering whether today’s developments will tarnish the U.S.’s image as a leader among world financial markets. Before the end of the trade today, the announcements made by the two storied banks, helped cause the New York Stock Exchange to plummet more than 500 points, and caused European markets to tumble. Markets in Asia were closed for holidays.

In an early-morning announcement, Lehman Brothers said it was filing for Chapter 11 bankruptcy protection after attempts to rescue the 158-year-old firm, which was struggling under $60 billion in bad real-estate holdings, failed. Lehman said that none of its broker-dealer subsidiaries or other units would be included in the bankruptcy filing and all of its broker-dealers will continue to operate. Bank of American also said in a statement early Monday that it would acquire Merrill Lynch in an all-stock transaction valued at $50 billion.

“The major investors including mutual funds, pension funds, and private-equity investors are moving money from the stock market to the Treasuries and Bond markets,” says Samuel D. Melvin, a mortgage planning agent at Desert State Mortgage, LLC. “This increases the value of the treasury and market bonds, which in turns takes pressure off of mortgage interest rates, driving them lower.”

Last week Lehman shares lost 45% after the financial company announced a third quarter loss of $3.9 billion. Standard & Poor’s Ratings Services said today that it removed Lehman from CreditWatch and lowered its long-term counterparty credit rating to ‘SD’ (selective default, meaning payments may not be made on some financial obligations), from ‘A’.

“I think it serves to cause all banks to look at transactions a little bit more conservatively,” says Bob Nesbitt, president of the Alabama division of Atlanta-based Citizens Trust Bank (No. 6 on the B.E. 100s Banks list with $338 million in assets). “The investment firms are traditionally firms that buy securities including mortgaged backed securities. As they have more problems it will cause their underwriting to be a little bit more stringent, which will in turn cause commercial banks to be a little more careful in their lending practices.”

Meanwhile, Bank of America’s acquisition of Merrill Lynch will create a company that will rival Citigroup Inc., the biggest U.S. bank, in terms of assets. By adding Merrill Lynch’s more than 16,000 financial advisers, Bank of America would have the largest brokerage in the world with more than 20,000 advisers and $2.5 trillion in client assets, Bank of America said. The combined company would have strong positions in retail brokerage and wealth management.

“Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders,” Bank of America Chairman and Chief Executive Officer Ken Lewis said in a press release. “Together, our companies are more valuable because of the synergies in our businesses.”

“I think it is

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Marcia Wade Talbert

Marcia is a multimedia content producer focusing on technology at Black Enterprise Magazine. In this capacity she writes and assigns stories to educate readers about social media; digital integration; gadgets, apps, and software for business and professional development; minority tech startups; and careers in STEM (Science, Technology, Engineering, and Mathematics). In 2012, she received two Salute to Excellence Awards from the National Association of Black Journalists and was recognized by Blacks in Technology (BiT) as one of the Top 10 Black achievers in the tech arena for 2011 at SXSW in Austin, Texas. She has spoken about technology on panels for New York Social Media Week, at The 2012 Rainbow/PUSH Wall Street Summit, as well as at Black Enterprise’s Entrepreneurs Conference and Women of Power Summit. In 2011, chose her as one of 28 People of Color Impacting the Social Web, and through crowdsourcing she was listed as one of BlackWeb2.0's/HP's 50 Most Notable African American Tastemakers in Social Media and Technology for 2010. Since taking on the role of Tech editor in September 2010, she has conceived and produced five cover stories on Technology and/or STEM and countless articles, videos, and slideshows online. Before joining as an interactive general assignment reporter in 2008, she freelanced with Black Enterprise beginning in 2003 while working as the technical editor at Prepared Foods magazine. There she further honed her writing skills and became an authority on food ingredients, including ingredients used in food fortification and enrichment. Meanwhile, her freelancing with Black Enterprise and helped her stay current on issues pertaining to the financial and business welfare of African Americans. As a general reporter for Black Enterprise she attended and reported on the Democratic and Republican National Conventions, where she interviewed Valerie Jarrett, senior advisor and assistant to President Barack Obama and U.S. Attorney General Eric Holder. Marcia has a Bachelor of Science degree in Agriculture with an emphasis in food science from the University of Minnesota, and a Master of Science degree in journalism from Roosevelt University in Chicago. En route to her secondary degree, she served as the editor-in-chief of the Roosevelt University Torch, a weekly, student-run newspaper. An avid photographer and videographer, Marcia is one of several employees at BLACK ENTERPRISE who interned for the publishing company as a college student. She lives in New Jersey with her husband, a food scientist; her seventeen-month-old daughter; and “The Cat”, but still considers Chicago home.