Big disruptions in the banking sector

Dear friends,

The newspapers woke us up today with unbelievable news I would say. Headlines such as: "Lehman Brothers, bankrupt", "Merrill Lynch sold", or "AIG facing liquidity crisis" are to be read in all papers.
We all ask ourselves:
1) How could that happen? How could 3 of the 5 investment bank stars on Wall Street end this way?
An academic answer can be found in the "Black Swan" book, which explains us about the difficulty of predicting big disruptions. What is even more questionable is the reliability of the ratings given by the famous rating agencies such as: Fitch and Standard & Poor's. If Fitch downgraded Lehman Brothers' rating only AFTER they filled for bankruptcy, how will we trust the ratings given to other companies?

2) Why didn't the Fed save Merrill Lynch like they did in the case of Bear Stearns?
Had they inject money to save it, it would have created another precedent on the market and worse, other players would have counted on Fed's help for the case of emergency. The so-called "moral hazard" would have been activated in the minds of the other market players.
However, the Fed did do something, namely, for the first time in 95 years they allow equities to be used as a collateral. This is another sign which highlights that the current situation is a big disruption.

3) What will happen to European banks?
After all that happened in the US, I expect European bank market to show more signs of weakness in the next weeks. It seems as if in Europe everything happens with a delay of several weeks.

4) Should we pursue a career in banking?
For the banking and finance graduates, as well as for the other talents who had to leave these "investment bank stars", this period of time is a very difficult one. The question is: where would you be safe? Definitely, no bank in the world can offer you workplace safety now. Still, if you're only looking for a secure job, you can always apply to the Kantonalbanks in Switzerland. You won't find there the same job activity excitement, but is a workplace if you're in trouble.