Tag Archives: AIG

Tech will suffer from financial meltdown


Sometimes you have to look around outside of your own personal sector and reflect on the world at large. If you haven’t noticed, our financial infrastructure is tumbling down around our ears. The U.S. agreed yesterday to bail out AIG at the cost of $85 billion. Just like Bear Sterns, AIG is “too big to fail.” The impact on the economy of AIG’s failure would be staggering. As my friend Steve Pizzo writes at News for Real:

If AIG failed, all those banks out there that replaced their regulatory capital with AIG IOUs would be in deep, deep, deep, deep, doo doo. If AIG failed the feds would be faced with the possibility — growing daily into a probability — of having to virtually nationalized a huge number of banks and S&Ls, replacing AIG’s IOUs with USA IOUs. (Yugo Chavez and Fidel Castro would get a good laugh out of that.)

It’s not just the financial sector. This thing will tsunami through the “real economy” – including tech. Jay Bhatti, cofounder of people search engine Spock offered some thoughts on the effect on tech. It’s not pretty:

The big players like Oracle, Sun, Microsoft and SAP … will feel an immediate impact. Financial Service firms are some of the biggest spenders of IT budgets around. I can imagine memo’s coming from the top to CIOs at banks telling them to cut costs ASAP. Naturally, they will start to push back on upgrades to new software (sorry Vista), ask for greater concessions on license pricing, and in some cases, abandon plans for new technology deployments such as new hardware or new ERP applications.

Microsoft will whether the storm, he says, since businesses still need to operate but “I would not be surprised if I heard Sun report: ‘We did not meet our numbers this quarter due to decreased spending and turmoil in the financial sector….’
Bhatti thinks the biggest impact will be on green tech, since those companies require serious capital, over a billion dollars in many case.

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Lehman Files for Biggest Bankruptcy in American History, rumors of warnings with AIG and Citibank and the coming market meltdown


Sept. 15 (Bloomberg) — Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.

The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan today. The collapse of Lehman, which listed more than $613 billion of debt, dwarfs WorldCom Inc.’s insolvency in 2002 and Drexel Burnham Lambert’s failure in 1990.

Lehman was forced into bankruptcy after Barclays Plc and Bank of America Corp. abandoned takeover talks yesterday and the company lost 94 percent of its market value this year. Chief Executive Officer Richard Fuld, who turned the New York-based firm into the biggest underwriter of mortgage-backed securities at the top of the U.S. real estate market, joins his counterparts at Bear Stearns Cos., Merrill Lynch & Co. and more than 10 banks that couldn’t survive this year’s credit crunch.

“There is likely to be a domino effect as other firms and individuals who relied on Lehman for financing feel the effects of its meltdown,” said Charles “Chuck” Tatelbaum, a bankruptcy lawyer with Lauderdale, Florida-based Adorno & Yoss and former editor of the American Bankruptcy Institute Journal. “The whole thing is frankly frightening for the U.S. economy.”
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