The New York meltdown

Implications: The damage is immense. The downstream impacts have not yet hit with full force. But a global tsunami has started.

Analysis: So the Empire State is allowing AIG, one of the world's largest insurance groups and owner of ILFC, to help itself. But is this enough? The earlier closure of Bear, Sterns and consequent smaller banker market was believed to be part of the reason eos closed down. Prior to that MaxJet closed because the mortgage crisis meant much less traffic across the North Atlantic. The big shrink in NY is having a palpable impact on aviation.

The news about Lehman is going to impact even more. Wall Street is a strong source of travel, typically the front end of the plane at full fare. The sharp cut back in business will hurt like nothing the airlines have experienced there before. One Lehman person we spoke with yesterday is based in the UK. This week he happened to be in New York and was told that he has to buy his own ticket home. Imagine that, hundreds of times over. When he gets home, there is no job. His costs for reimbursed travel make him just another creditor. He might get a few pennies on the dollar.

This morning the financial tsunami is still going - markets the world over are taking a hammering. What started off as a mortgage crisis appears now to be a global financial crisis. The biggest impact is that no bank is immune from this contagion. Banks operate on a belief system; you believe they are trustworthy and safe. Normally the government's central bank is the guarantee. Well this week we see that not every bank is backed and therefore you would be right to question your bank's stability.

We wonder about Wall Street though. As literally thousands of high paid jobs disappear this week, causing horrible pain to tens of thousands of people locally and many times that overseas, are any of the senior executives who drove these banks into the abyss going to be punished? The top people and their families are unlikely to go hungry. But how many of them ought to go to jail?