Volatile week in the stock market last week, eh? A whole pile of stunning news combined to become the biggest financial story of the past 50 years. Here were my top 10 shockers:
10. I will never play poker with John Thain
The Merrill Lynch (NYSE: MER ) CEO bluffed the markets long enough to steal Bank of America's (NYSE: BAC ) interest away from a hemorrhaging Lehman Brothers (NYSE: LEH ) . Completely under the radar, Merrill Lynch sold itself for a premium, while Lehman declared bankruptcy. Of course, that's assuming the deal goes through.
9. Fannie Mae (NYSE: FNM ) and Freddie Mac are so last week
That bailout seems like years ago. Bear Stearns? Eons ago.
8. RIP, Wall Street
There were five major independent investment banks at the beginning of the year. At the end of last week, there were two. Yesterday's Fed reclassification of Morgan Stanley (NYSE: MS ) and Goldman Sachs (NYSE: GS ) from investment banks to bank holding companies effectively marks the end of Wall Street as we knew it.
7. Worst hookup since Dennis Rodman and Carmen Electra
The latest rumor mill has the remaining artists formerly known as investment banks merging with commercial banks to gain access to the latter's stable deposits. Great idea! Now that they've proven themselves to be divinely susceptible to black swan events, let's give Wall Street access to our savings.
6. Is Paulson using a 12-sided die?
The government let Lehman fail as a signal that the bailouts were over. Two days later, it stopped bailing out banks and started bailing out insurance companies (namely AIG (NYSE: AIG ) ). Rick Munarriz's tongue-in-cheek satellite-radio bailout speculation isn't as funny as it was before.
5. Next headline: Bank of America merges with U.S. Treasury
Bank of America was already the largest bank in the U.S. Now it's gobbled up the largest mortgage lender in the U.S. (Countrywide), and it's in the process of buying what was the third-largest independent investment bank (Merrill Lynch). I guess we haven't learned the "too big to fail" lesson.
4. Yields on 3-month T-bills went negative!
Large depositors feared banks so much that they were willing to pay the government to do what their mattresses would have done for free.
3. I wish my creditors were this enthusiastic
The week ended with plans of a $700 billion government bailout of the whole mortgage lending system. How bad has it gotten when we have a major stock market rally on news that we're collectively going even deeper into debt?
2. United States of America (Ticker: AIG)
Unless shareholders successfully pay off the $85 billion government loan, Uncle Sam has the option to own 79.9% of a private company (AIG). Freddie and Fannie have always been quasi-government entities, so the government's control over them didn't bother me much. But the government owning a private enterprise is one step too far toward socialism for my free-market taste. If the government ends up actively competing in the insurance business, expect many unintended consequences.
1. What'd I miss?
At the beginning of last week, the S&P 500 was just less than 1,252. At the end? Just more than 1,255. 0% change, statistically speaking. Maybe this week will be more eventful. In the meantime, catch up on all our Foolish coverage of the financial crisis.