Tremors continue to rattle Wall Street

After last week's startling events on Wall Street that sent shockwaves across the global markets, many would have thought the problems facing the US financial sector were over. However, that was not to be, as more tremors struck the world's premier financial market this week that added to the global gloom. What's worse, at the end of another tough week, there was no clarity on whether the US government will be able to arrest the slide. An unprecedented bailout package proposed by White House to pull the rotten financial sector out of the abyss was stuck in the crosshair of political gamesmanship. The failure of the Bush regime to convince the lawmakers on both sides about the massive rescue plan sent global markets into a tailspin on the last day of the week. The fire sale of Washington Mutual to JP Morgan also had an adverse effect on market sentiment. Shares of North Carolina's Wachovia Corp. nearly 30% in early trading on Friday following the failure of Washington Mutual.

The Federal Reserve gave America’s last two big investment banks, Goldman Sachs and Morgan Stanley, permission to change their status to bank holding firms. They will be subject to stiffer regulation, but allowed to take deposits. Goldman Sachs raised US $5bn to shore up its capital by selling shares to Berkshire Hathaway, the firm run by Warren Buffett, a celebrated investor. The next day, it raised US $5bn more from a share offering. Mitsubishi-UFJ, Japan’s largest bank, agreed to buy up to 20% of Morgan Stanley for US $8.4bn. The Federal Bureau of Investigation said it was looking into 26 cases of potential fraud related to the collapse of America’s mortgage industry. The financial institutions under investigation are said to include the now-defunct Lehman Brothers, as well as AIG, Fannie Mae and Freddie Mac. In a bid to attract more investment to America’s struggling financial sector, the Fed relaxed rules on bank ownership. Private-equity firms will now be allowed to own bigger stakes.