"Too Big to Fail" Leaves More Unanswered Questions

September 18, 2008

FNMA, FHLMC, Lehman Brothers, AIG and Merrill Lynch have been taken off the playing field as independent institutions in the past 10 days. Government lifelines provide day-to-day support for FNMA, FHLMC, and AIG as “too big to fail” institutions that faced severe liquidity crises. While Lehman failed, Merrill Lynch hastily sold itself to Bank of America to avoid a similar fate. Some banking industry luminaries are calling for the resurrection of the Resolution Trust Corporation.

Will bank failures match the 1980s and early 1990s? What will happen to a range of credit markets from mortgages to consumer and commercial lending? How will community banks and credit unions weather this raging storm?

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