Global financial meltdown hits banks

last week began with thousands of employees in London losing 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.

Very soon after, Bank of America bought one of Wall Street's most well know banks; Merril Lynch, in what has been reported to have been a 'rescue operation'. Meanwhile one of the biggest insurance companies AIG had to be aided $85billion by the US Federal Reserve after experiencing massive financial problems.

But American banks weren't the only ones to feel the heat, as the Bank of England put £5billion into the markets, while the European Central Bank injected €30billion.

The Bank of Scotland and Halifax owner HBOS watched their shares plummet to the point where they were forced to accept a takeover offer made by one of the UK's leading banks Lloyds TSB creating a giant bank worth £30billion.

It is common knowledge that significant movement in the finance sector will eventually result in noticeable changes to everyday life.
The banks are likely 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 stop lending as much to customers by means of credit cards, personal loans and home loans. This means that it could be harder to be approved credit, based on a number of factors such as credit history, and will probably mean higher interest rates.

This shortage of credit is expected to cut the amount of spending made by Aussies 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.