What Merrill, Lehman, And AIG Customers Need To Know

NYT’s Ron Leiber breaks down what you need to know and do if you are or were a customer of Merrill Lynch, Lehman, or AIG

Merrill: If your broker leaves, you have to decide whether you want to go with him. Whether you come along or wait for Bank of America to take over, you will lose access to your funds for a week or two until the new computer systems take over.

Lehman: The brokerage unit didn’t file for bankruptcy, the parent unit did. So for now, customers’ brokerage accounts remain as normal. Eventually, though, they will get transferred.

AIG: While the situation is dire, they’re still in business. Your life insurance policies are still good. If they go bust, state bodies known as guaranty funds will step in and cover unpaid claims and pay out policies.

The integration of different computer databases is always an opportunity for accounts getting messed up or lost. Make sure you have printouts of your recent statement and have all your account numbers and access codes memorized or written down somewhere.

What Changes in the Financial World Mean to Customers [NYT]

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  1. PsychicPsycho3 says:

    Remember kids, not a recession!

    • Erwos says:

      @PsychicPsycho3: There isn’t a recession, because a recession has a very specific meaning. You can have bad financial times without being in a recession.

      • nogas2speed says:

        @Erwos: Right on the money! Why have a definition of a word (any word, for that matter,) if it is not going to be followed. That just causes hysteria. Let’s just go ahead and call it a depression. We don’t need to actually be bothered with those silly definitions, let’s call stuff what it FEELS like instead of what it is. If feel giddy today. I’m going to make everyone call me “Giddy” today.

      • SigmundTheSeaMonster says:

        @Erwos: I think PsychicPsycho3 was being funny…(love that picture!)

      • ViperBorg says:

        @Erwos: Mr. President Bush, I never knew you had an account on Consumerist.

        • ILoveVermont says:

          @ViperBorg: Bush doesn’t know the definition of a recession, so that can’t be him. Cheney, on the other hand…

          • ViperBorg says:

            @ILoveVermont: Eh, your right. Aimed too high.
            @Erwos: Republican? I can tell. (Can’t take a joke, having to break out some “credentials” to back yourself up, thinking that saying you have something on the internet, without any proof, actually means something, asking where a moderator is because *gasp* you were the subject of a cheap shot at the president, etc, etc, etc…)

            Yeah, where is a common sense when you need it?

        • Erwos says:

          @ViperBorg: I don’t see what your problem is. My degree in economics (which included significant amounts of finance) says I know what I’m talking about – let me know if you have any similar credentials.

          Where’s the moderator when you need her?

          • dweebster says:

            @Erwos: Plenty of your fellow troopers getting their pink slips at Lehman, Bear Sterns, Merrill Lynch and whatever’s failing this hour.

            I guess having a degree doesn’t necessarily mean what you say has more basis in reality than a stupid old farmer afterall, eh? At least the farmer can tell you that if your crops don’t get water, you won’t have much food at harvest time. No degree necessary – a little common sense, though…

            Massively deregulating markets, giving loans to people without income to pay them back, and opening the treasury to the rich for plundering seems to have not worked out afterall, despite economic apologists on the corporate dole…

            • Erwos says:

              @dweebster: Nice ad-hom attack. Guess the mods only care about those when they’re about the submitter.

              The fact remains: the definition of a recession is negative GDP growth, not job losses, not “OMG the banks are failing”. You couldn’t refute that, so you decided to attack the messenger. Your farmer anecdote reveals just how unsophisticated you are with regards to an extremely sophisticated system. You can’t just boil down successful national economic policy into a bunch of simple rules (if you could, well, you’d be making rather a lot of money!).

              And, no, I don’t work in the financial industry. None of my buddies are getting laid off, at least as a direct result of this.

  2. headhot says:

    And the fundementals are strong! As long as you carefully define what the fundementals are..

  3. ophmarketing says:

    What if AIG handles your 401(k) retirement account? If they go bust, what will happen to that money?

    • mrgenius says:

      @ophmarketing: 401(k) plans are protected by ERISA (pensions are protected under Pension Benefit Guaranty Corporation). This doesn’t protect the value of market securities themselves, but would protect the plan assets from creditors in a bankruptcy filing.

      As a practical matter, what would happen is that your employer would likely choose to transfer the plan to another firm, say Fidelity, as is their prerogative. The duty of AIG in the case of a 401k plan is largely administrative and they are required to segregate your assets from theirs.

  4. homerjay says:

    C’moooon Schwab! Hold it together!! Hoooold it!!!!

  5. Fuzz says:

    So don’t worry, your tax dollars will pay for the life insurance you have been paying into. That way, you get to pay for it twice! Nice system.

  6. mizj says:

    What a giant mess. And the only ones our brilliant leaders can think of to provide the bail outs are the taxpayers, who are already paying double on gas, food and damn near everything else – that is, if we even have jobs anymore.

    I’m BEYOND disgusted with how far this whole thing was allowed to go.

  7. MonkeyMonk says:

    So how did companies such as AIG get so thoroughly hosed by the mortgage-backed securities fiasco while other companies such as MetLife had the foresight to stay the f*** away from them? Maybe we should be giving those CEOs big bonuses and not to the losers who drove their companies into the ground.

  8. Roycester says:

    at a quandary here – both the wife and I are in process awaiting life insurance with AIG – if they burn out on the investment side, their financials are sure to drop and their AM Best Rating will also. That will cause them to begin to make the kind of stupid decisions where they “temporarily” dip into supposedly untouchable funds.

    What to do, what to do…

  9. Oh come on, it’s not like Bear, Lehman, and AIG were hiding their mortgage holdings as off-balance sheet activities to deceive investo……oooooooooooooooooh. Nevermind.

  10. Kimli says:

    My husband works for AIG. We’re a little more concerned with whether he’ll have a job at the end of the week, and we’re in Canada. This sucks.

  11. jdmba says:

    I am WaMu and Merrill for my entire picture … not a good week.

    I am happy to see that Merrill is safe and greatly disturbed about WaMu; particularly the lack of real coverage. I am in the process of closing my WaMu account and moving to BofA. Since all my bills were autopaid out of WaMu this was no light decision, and is a pain in the a$$ at this point to try to get all the companies to change; but the WaMu news, and the lack of more news, is disconcerting.

  12. frodo_35 says:

    I keep telling myself this is not a recession but it sure feels like one. The sad part is the people who helped to cause the majority of the problems will hit hard times also. I mean having to down size to only 10 homes has gotta hurt. OH god no more botox for my girlfriend or my wife. Gasp the kids might have to work one day (just kidding).

  13. P_Smith says:

    Saying a business is “too big to fail” is lying saying the US is too powerful to lose in Iraq.

    Incompetence and corruption by those at the top will kill any organization.

  14. akronharry says:

    I have a 403b annuity with them. What happens to that?

  15. adamondi says:

    What’s going to happen to the subordinate companies of these big firms? There is a spider web of other companies owned or controlled by these big guys. What should THOSE customers do?

    • ohenry says:

      @adamondi: I think it depends on the company. I work for one of those companies owned by AIG and I know that we have our own assets separate from AIG, so essentially if they fail, we can still continue business just like we did before AIG purchased us, minus the corporate funding that we had while under them.

  16. mac-phisto says:

    @Orv: aren’t we splitting hairs here? wamu is #6 – $200 billion in deposits. FDIC can’t let them fail w/o tapping a credit line from the treasury. can they afford to let them fail? can they afford to let them not to? i think the answer to both those questions is NO (which we know is an impossitude). simply put: wamu can’t fail.

    wamu collapse = SIGNIFICANT effects throughout the financial sector. 3, 4 & 5 (wachovia, wells fargo & citi) are all in the same boat. none of these institutions (including wamu) could be paired with a suitable peer – 1 & 2 can not absord any deposits from these institutions without exceeding depository maximums.

    we’re left with a tough choice – bite the bullet, pay out & pray that 3, 4 & 5 turn their shit around OR partner 2 shaky peers together & hope you don’t force the collapse of 2 banks instead of just 1 OR eliminate/change depository maximums above 10%/$700 billion OR court a foreign holder (do we even want to speculate on the impact this would cause? let’s not).

    no matter how you look at it, the choices suck (which is why “too big to fail” is such a bad, bad idea). interesting times, though. quite exciting to see what happens next.

  17. Tankueray says:

    I got a newsletter this morning that had something about AIG. It said they turned down offers for buyout because they’d rather have a $40 billion bailout from the Federal Reserve. I assume when that note comes due they’ll just get the government to forgive it.

    [www.search-autoparts.com]

  18. Riuski says:

    Interesting that everyone is quick to jump on the Republicans when the legislative body is mainly made up of Democrats. I’m pretty certain that Congress is the law-making body of the U.S. government, not the president, but of course it’s just so much easier to jump on the bandwagon and bash whomever the media wants to bash, instead of thinking independently.

    • ViperBorg says:

      @Riuski: Independent thought brings the likes of Ralph Nader.

      Need I say more?

      • Riuski says:

        @ViperBorg: Yeah, let’s use one extreme example of an independent and stereotype the entire population.

        @mac-phisto: I wasn’t trying to take a party stance. I just wanted to point out to certain people that no single party is responsible. I agree with you for the most part (especially the one saying EVERYONE f*cked up), but I still think Perot’s big ears were good objects of ridicule, and I don’t think banks failures are signs of the apocalypse. Everyone knows that people don’t learn unless they’ve experienced crises (and oftentimes still don’t), so while this credit/mortgage situation is a ridiculously expensive lesson, I’m hoping some good things will come out of it.

    • mac-phisto says:

      @Riuski: by no means do i plan on taking a party stance here, so don’t take this as a democrat rebuttal – i’m not a dem. i just want to clarify a bit.

      you are correct that the legislative body makes the laws, but the administrative agencies that are largely responsible for implementing, interpreting & enforcing those laws (as well as making recommendations for & drafting new legislation) are under the auspice of the executive branch.

      i think a large part of this disaster belongs squarely on the shoulders of our civil servants & the SES. democrat or republican, those folks have done a bang up job of proving the incompetence of government. THEN blame congress & the president (& not just the current folks – we need to include just about all of them in the past decade or so).

      finally, blame everyone who laughed at ross perot & his big ears (myself included). all these goings on are just a sideshow to the main event – massive job loss & the evaporation of our entire industrial base over the past 15 years. while i’m certainly not suggesting he would’ve been a great president, he certainly was right about that sucking sound.

  19. frodo_35 says:

    What we need is more deregulation. Oh yah go shopping its your civic duty.