Lehman Brothers' bankruptcy ripples through world economy; BOI: Losses to reach $4 million maximum.
By JPOST.COM STAFF, APTA stock exchange generic 224.88(photo credit: Bloomberg)
Following Lehman Brothers' announcement that it was filing for bankruptcy in the United States, the Tel Aviv stock exchange plummeted on Monday morning.
When trade closed in the afternoon, the Tel Aviv 25 Index dropped by 2.50 percent to 911.61 points and the Tel Aviv 100 Index fell by 2.26%, to 833.64 points.
The Tel-Tech Index dropped by 3.15% to 221.59 points and the real estate index dropped by 3.54% to 303.33 points.
The stock exchanges in European capitals also plunged sharply when trade opened.
The Finance Ministry announced Monday following what has been termed the largest bankruptcy claim in history that the Israeli market remains stable. a slowing down in growth, however, was expected.
The Bank of Israel said it would lose at the most $4 million over deals mediated by Lehman Brothers. The BOI said it was not holding any Lehman Brothers stocks.
Lehman Brothers' announcement that it was filing for bankruptcy came after all potential buyers walked away. Potential suitors were spooked by the US Treasury's refusal to provide any takeover aid, as it had done six months ago when Bear Stearns faltered and earlier this month when it seized Fannie Mae and Freddie Mac.
Samuel Hayes, finance professor emeritus at Harvard Business School, said the Bush Administration might get a lot of blame for the situation, which could benefit US Democratic presidential candidate Barack Obama.
"Just the psychological impact of this kind of failure is going to be significant," he said. "It will color people's feelings about their well-being and the integrity of the financial system."