With the forced bankruptcy of Lehman Brothers, rushed rescue effort of AIG by the federal government, and tumbling of stocks on Wall Street, things are not looking good for the financial sector.

 

Corporate Finance professor Timothy Logan summarizes the situation, saying that the contraction of bank assets is forcing investors to turn to treasuries. and the government may not sustain all of the financial losses.

 

“Tightened lending standards due to uncertain economic reasons leads to less money in the people’s hands”, said Logan.  “Because it is a vicious cycle, the situation is teetering on catastrophic.”

 

Professor Buckles weighs in on the actions that the Federal Reserve can take to alleviate the problem.

 

“They are doing all that they can right now,” said Buckles. “The regulatory role is going to have to change dramatically and that is going to be the biggest challenge to do it a way that encourages an active and healthy financial market.”

 

Logan predicts that the “free wielding lending over the past five to seven years is over, and future projects will have more conservative lending terms.  Rules for mortgages will be changed as well, and it will be generally much tougher to receive one.”

 

The future is looking uncertain remaining giant Wall Street firms such as Goldman Sachs and Morgan Stanley. Both firms have suffered significant losses in stock shares this week alone.

 

“I don’t know if there are more to come,” said Professor Buckles. “I hope not, but it would not be surprising to find another one or two.”