World View

Fears of a global recession hit stock markets in the US, Europe and Asia after the American investment bank Lehman Brothers filed for bankruptcy. The meltdown of the American financial crisis made headlines everywhere. The other news making headlines was that of the deteriorating relations between the US and Pakistan due to Washington's targeting of suspected Taliban and Al Qaida operatives in Pakistan. These events were contemplated, analysed and commented on. We present here excerpts of editorials from the regional and the international press.

US market crisis

It was a Black Mondy at Wall Street. Markets plunged to one of the lowest levels amidst fears of a global credit crunch with the collapse of Lehman Brothers investment bank. It was soon followed by the buy out of Merill Lynch and the bailing out of AIG by the US government. Worldwide, the reaction prompted concerns from customers at the security of their investments, and workers about their jobs.

Commenting on the meltdown, The New York Times stated that "it is oddly reassuring that the Treasury Department and Federal Reserve let Lehman Brothers fail, did not subsidise the distress sale of Merrill Lynch to Bank of America, and tried to line up loans for the American International Group, the troubled insurer, rather than making a loan themselves. Government intervention would have been seen either as a sign of extreme peril in the global financial system or of extreme weakness on the part of federal regulators.

However, it believed that the system may be strong enough to absorb the downfall of Lehman and Merrill - though the chaos at AIG seems harder to swallow. "However, the stock market's initial reaction - a brutal drop, but not a Black Monday-style sell-off - offered a ray of hope that the disruptions may be manageable. And, more important, barring the risk of cascading failures, regulators finally seem willing to hold Wall Street accountable for its mistakes," it added.

Washington Post was more forthright and hoped for a cost-analysis right on Lehman.

"We have to hope that policymakers got that cost-benefit analysis right on Lehman; one lesson of the last year is that no one has a certain template to guide such decisions. Wall Street massively overcommitted to unwise investments. Undoing all of those mistakes will take time and cost billions of dollars - on top of what investors and consumers have already lost. But the only thing worse than paying those costs would be pretending that they can be avoided," it said.

On the other hand, The Christian Science Monitor blamed greed for the meltdown. "A credit-based economy that turns short-term money into long-term investments needs safeguards, such as capital reserves and transparency. These help handle the greed side of markets. When panic sets in, government must step in and perhaps take over private assets and resell them. That helps handle the fear side of markets," it remarked.

Commenting on the impact in Britain, The Telegraph lamented: "Our pensions and investments have been hit by what happened in New York. People will be angry, because these banks have lived high on the hog by lending irresponsibly through an era of unfeasibly cheap money. Now comes the reckoning - but we will all pay the price."

However, it was optimistic about the future and termed the crisis as a bumpy ride. "Rather like the deflation of the UK housing bubble, draining the poison of unsustainable credit from the banking system will be painful but, in the long run, healthy. Between now and then, we face a very bumpy ride indeed."

Financial Times felt that the regulatory agencies should do more in dealing with the complex and interwoven financial system.

It warned: "If, as many predict, big financial "supermarkets" become the norm, the average financial institution will be exposed on more fronts than before. Regulators, national and international, will need to co-operate, to obtain the knowledge they need to oversee such sprawling behemoths. No state insurance regulator could possibly have identified AIG's problems in time."

As the US financial crisis pulled the Indian stock market, Sensex, down by 470 points on Monday, Times of India commented that there is likely to be a tightening of liquidity in future, and the markets would feel some effect despite the upswing in the Indian economy.

"Things aren't too bleak for India with an industrial growth rate of 7.1 per cent in July and the global price of oil falling below $95... So long as the fundamentals of the Indian economy remain strong, foreign funds will continue to come. But it's going to be a rough ride from now on," it said.

Pakistan's problems

President George W. Bush's decision to allow US forces in Afghan-istan to cross the international border with Pakistan in pursuit of Taliban and Al Qaida has created an uproar in Pakistan.

"This is a dangerous development, both for the US and Pakistan, declared Arab News.

"If Pakistani public opinion cannot take out their resentment against the US - which it cannot - it is going to take it out on those it can. That is bad news for the government of Prime Minister Yousuf Raza Gilani and the new president, Asif Ali Zardari," it said.