Ron Amundson’s Political Blog

Its been 25 hours since Lehman brothers announced their bankruptcy, and the fallout is already occurring, even reaching main street. Yep, a friend lost her job at a mortgage firm yesterday, a thousand miles removed from Wall Street.

Aldon Hynes, a fellow I used to have spritely discussions with in 2004, being I was a Republican and he was a Democrat has some interesting things to say, as it hit very close to home for him too, but in a different way. His blog entry entitled My Role in the Collapse of Lehman Brothers is pretty powerful.

How many of the people that will lose their jobs at Lehman Brothers or at Merrill Lynch, will end up in similar financial difficulties? How many will need to sell their houses at a loss, adding to a further slide in housing prices? From a Wall Street perspective, how much will the debts of Lehman drag down other financial services firms?

Well, being it hit my friends employer already, its likely to have some pretty wide ranging effects. I can only imagine the headaches which are going to occur in a wide range of sectors, as lines of credit get pulled in. Everything from manufacturing to retail is likely subject to difficulty. And those effects are 2nd and 3rd order. I imagine there will be a wealth of east coast real estate taking a real header as the 28,000 employees directly affected by the bankruptcy have no place to go, to say nothing of those who will loose their jobs as a result of the Mer-BoA deal… and that assumes that AIG, WAMU, and others remain afloat which is not looking too likely. It may not be today, but it likely wont be long… and those ripples are sooner or later going to hit mainstreet.

I twittered something earlier… as concerns the average Joe, who may just be sitting back, and saying, they got whats coming to them… and in many ways, deregulated financiers did themselves in.  Otoh if Joe ends up not gettig his full paycheck, as a paycheck depository failed… its going to get real very fast. Ie FDIC guarantees $100,000… which is fine for a small employer payroll, but what about the bigger entities, or worse yet, massive payroll processors. Joe could certainly find himself in a real bind, if those entities fail. No doubt govt would step in… but its rare indeed for things to happen quickly in such domains.

The other ripple is likely to be healthcare… employees may find navigating the complexity of COBRA most disheartening, to say nothing of the real cost. I’ve been down that path before, its not a fun one, but it is an eye opener.

Yet…. what we have is determination to dig ourselves out, we have ideas, creativity, and a will to succeed, with or without the financial sector. It wont be easy for sure, and there will be damages and bruising along they way… yet, we will get through this one way or another.