Global financial meltdown hits banks

In September 2008, thousands of employees in London lost jobs as a result of the collapse of the famous Lehman Brother investment bank after they filed for bankruptcy. The bank had been operating for over 150 years before they fell victim to the current financial meltdown sweeping across the globe.

Before the papers had much time to shed light on this event, Bank of America bought one of Wall Street's most well know banks; Merril Lynch, in what has been reported as a 'rescue operation'.

Meanwhile American International Group, Inc. (AIG), a world leader in insurance and financial services was bailed out by the US Federal Reserve after experiencing massive financial problems. But American banks weren't the only ones to suffer, as the Bank of England put £5billion into the markets, while the European Central Bank gave €30billion.

The Bank of Scotland and Halifax owner HBOS were forced to accept a takeover offer made by one of the UK's leading banks Lloyds TSB as their shares plummeted. This has created a giant bank worth £30billion.

It's a known fact that significant changes in the finance sector will ultimately result in noticeable changes to our everyday lives.

The banks will begin to hold on to their money to help convince investors that they can recover from their bad loans and investments. As a result of this the banks will become more thrifty on who the lend to, making it harder to get approved for things like credit cards, loans and mortgages.

This means that it could be harder to be approved for credit, based on a number of factors such as credit history, and is likely to increase interest rates.

This shortage of credit is expected to cut the amount of Aussie spending which will in turn slow down economic growth. This vicious cycle continues to spread its effects, as less credit means less spending, and less spending means less demand so businesses are likely to be hit hard and job cuts will follow.