The Daily Outrage: As companies go under, lending market tightens

WHO: The banking and financial industry

WHAT: The bankruptcy of Lehman Brothers and the sale of Merrill Lynch to Bank of America, along with the rumors of trouble at other institutions, are only the latest symptoms of the industry’s mortgage-
related implosion.

WHY IT’S HAPPENING: Put simply, they made bad investments in securities that turned out to be based on highly risky subprime mortgages. Nearly every financial institution has been forced to make major write-offs in recent months and pull back from loans and investments.

WHY IT’S A BAD IDEA: The market clearly needs a shakedown, but every company collapse contributes further to an already-tight lending market that ultimately hurts consumers and the economy.

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