Merrill Lynch

On the eve of a possible deal for the financial bailout, let's take a look at Federal Reserve Chairman Ben Bernanke's and U.S. Treasury Secretary Henry Paulson's past plans to deal with the massive credit contraction and how they worked out. All the plans have failed so far and now we have the very aggressive $700 billion plan. What if this fails too? I propose the "Mega-Bank!"

Plan A (Mid-2006-Thru Mid-2007): Do Nothing. The first sign of major trouble started with problem sub-prime loans and the collapse of two Bear Stearns hedge funds. The Fed took a do nothing approach, saying the market can take care of itself. FAILED

Plan B (August 2007): Cut Interest Rates. The Fed started cutting the fed funds rate in ...

The Federal Reserve, with the blessing of the Treasury Department, moved forward with an aggressive plan to rescue embattled insurer American International Group (NYSE: AIG). The Fed agreed to lend up to $85 billion to AIG, which gives the company the liquidity needed to avoid bankruptcy and move ahead with asset sales.

The AIG facility has a 24-month term and interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. The loan is collateralized by all ...

UPDATE: Lehman Brothers (NYSE: LEH) has officially filed for Chapter 11 bankrutcy following unsuccessful efforts to sell itself over the weekend, as buyers walked away after the U.S. government refused to give guarantees on Lehman's mountain of souring assets Lehman listed total assets of $639 billion and debt of $613 billion as of May 31, 2008.

The Fed took a hard line on Lehman following last week's bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and the bailout of Bear Stearns in March. Fed officials knew there would be major ...

Lehman Brothers (NYSE: LEH) is on the verge of liquidation following unsuccessful efforts to sell itself over the weekend, as buyers walked away after the U.S. government refused to give guarantees on Lehman's mountain of souring assets.

The Fed took a hard line on Lehman following last week's bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and the bailout of Bear Stearns in March. Fed officials knew there would be major backlash if any more bailouts were paid for with the taxpayers dime.

Without the government back-stops ...

According to reports from the Wall Street Journal, high level talks in the Lehman Brothers (NYSE: LEH) crisis continued on Saturday and a deal to sell all or part of the beleaguered investment bank could be announced as soon as tonight.

The report noted that potential buyers including Bank of America ...