Update: The Dow ended up closing down 504 points for the day

The past 24 hours have been about as chaotic a time as Wall Street has seen since Black Monday or possibly the Great Depression. Here are a few highlights:

• We’ve seen one of the top investment banks fail to secure a bidder and file for bankruptcy
• We’ve seen Merrill Lynch essentially forced to be acquired by Bank of America for $50 billion in stock
• We’ve seen shares of AIG fall 80% today (World’s Largest Insurer)
• We’ve seen WaMu shares fall down 25% to a market cap close to $3 billion
• With 40 minutes left in trading, the DOW Industrials are down 399 points or 3.5%
• Alan Greenspan called this a once in a century crisis.

With all that going on, what else could be happening?

A Consortium of 10 Banks Has Established a $70 Billion Loan Program to Protect Liquidity

According to the AP:

The ten banks, which include JPMorgan Chase & Co. and Goldman Sachs Group Inc., said they were committing $7 billion each for the pool. The pool would act as a signal to the marketplace that banks, brokerages, and other financial companies can lean on the fund to take care of borrowing needs.

The banks said the program will be available to participating banks which can get a cash infusion up to a maximum of one-third of the total size of the pool. The size of the loan program might increase as “other banks are permitted to join.” All participating banks intend to use this facility beginning this week, the statement said.

The banks also include Bank of America Corp., Barclays PLC, Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Merrill Lynch & Co., Morgan Stanley and UBS.

Could this action from the banks help preserve their own future and that of other banks?
Personally, I think it is a great idea and hope that other major banks jump in and help pool funds to build the loan program. It is forward thinking like that which has been absent from the financial institutions for some time. Perhaps the banks can save themselves — we see that Washington failed to save Lehman — seems that there are few other options left.

Any Thoughts?

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Tags: AIG, bank of america, finance, lehman, lending, Merrill Lynch, mortgage

If the announced planned merger of Bank of America and Countrywide Financial Corp goes through, BofA will be involved in about one in every four mortgage loans in the United States.

One in four!

Now one way to look at this is, this is a good thing. It will probably rescue Countrywide -described by the New York Times as, “the troubled lender that became a symbol of the excesses that led to the subprime mortgage crisis.”

Another way to look at this is bad…bad news for the U.S. economy and one of the biggest signs to date just how fast it is sinking beneath a tidal wave of For Sale signs.

Why?

Because the head of BoA ,Kenneth Lewis, has been quoted as saying that, although his bank always wished to be a much bigger player in mortgage banking, he wouldn’t even think of buying up another mortgage lender, such as Countrywide, “until blood is running in the streets.”

Guess the blood has started to gush enough to get Bank of America’s interest.

Meantime, the damage done by the subprime mortgage fiasco just keeps getting worse with no end in sight.

The head of the Federal Reserve is now painting a really bleak picture of the economy, a real about face from only a few months back.

Says Ben Bernanke, “The outlook for real activity in 2008 has worsened.”

With that very much in mind, Bernanke has suggested that the Fed might make yet another, bigger cut in interest rates and real soon.

That’s good, because American consumers are not exactly happy campers right now.

The biggest retailers in the nation are saying that their holiday sales gains are weaker now than any time in the past five years.

But even that may be too little and much too late, which may force Congress to step in and do what it always tries to do when capitalism runs amok: slap government controls on parts of the economy.

Remember how when word of the subprime mortgage problem first really got the attention of the public and news media, it seemed a somewhat localized problem with a quick fix provided by slightly lower Fed rates the obvious answer?

Well, forget that. This has turned into a global credit crunch leading to the forced resignations of some banking and mortgage lending giants’ chief executives, not to mention the almost certain prospect of tens of thousands, if not millions, of homeowners on the cusp of foreclosure.

So, I say, bless Bank of America for buying the United States. Heck, it might as well snap up Canada and Mexico while it’s at it.

That way, if nothing else, everyone will save on those nasty ATM fees cause we will all be customers of Bank of America one way or the other.

Bank of America, Countrywide, subprime mortgage, economy, Bernanke, credit crunch

Tags: bank of america, Ben-Bernanke, countrywide financial corp, federal reserve, The Fed