Will you be my sugardaddy?

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What a mess.

Lehman Brothers went belly up this weekend. Bank of America acquired Merrill Lynch. American International Group (AIG) is on the edge bankruptcy or being acquired for pennies on the dollar. Last week the federal government took over Federal National Mortgage Association and Federal Home Loan Mortgage Corp.

When JP Morgan Chase took over Bear Stearns last March, the US government set a potentially ugly precedent of not letting financial companies fail. This happened again with the takeover of the quasi-government agencies: Freddie Mac and Fannie Mae.

Rumors of Lehman Brothers demise started last week. The Government went into the weekend saying that it wouldn’t bail out Lehman. The Government put the burden of finding a solution on the private sector. Several financial institutions were in the running, but it boiled down to Bank of America or death. The answer was death.

It was kind of strange: Bank of America started the weekend in talks to acquite Lehman Brothers, but ended up with a different partner: Merrill Lynch I guess they didn’t want any more subprime garbage after acquiring Countrywide.

The next piece of the puzzle is seeing what happens with AIG. AIG was downgraded by Standard & Poors, Fitch, and Moodys. This will cost AIG billions of dollars. They now need to raise capital and it looks like they will have to sell assets or find a sugardaddy.

The catch to AIG is how much money they need. They used to have a market capitalization of around $200 billion. At the end of the day on September 15^th, their market capitalization was around $15 billion. They are looking for financing of $50 billion. Why would someone lend a company money for 3x their market value? Will they be too big to fail? Or will we the taxpayers be their sugardaddy?

Check out www.104finance.com for more information about this crazy financial situation we seem to have gotten ourselves into.