Diamond and Kashyap on the Recent Financial Upheavals, by Steven D. Levitt, is an article published on September 18, 2008 at 10:04am at the New York Times website. 

Steven is as confused as everyone else is about what is going on in the current financial world.  He asked some colleagues to help explain things.

Some great basic topics covered in this article:

• What has happened that is so remarkable?
• Why did these things happen?
• Why did the Treasury and Fed let Lehman fail but rescue Bear Stearns, Freddie Mac, and A.I.G.?
• I did not work at Lehman or A.I.G. and do not own much stock; why should I care?
• What does it mean for the Fed and Treasury going ahead?
• What does this mean for the markets going ahead?
• When will the turmoil end?

Here are some interseting facts mentioned in the article (it’s an informative and readable article):

• The Treasury only got authority from Congress to nationalize Fannie Mae and Freddie Mac in July 2008 — could someone have seen something coming?
• Remember WorldCom’s bankruptcy?  It’s assets were $100 billion.  The Lehman Brothers assets, now in bankruptcy, $600 billion — 25,000 employees.
• A.I.G. has assets over $1 trillion and over 100,000 employees worldwide.
• Lehman just had too much debt, made visible by the failures at Freddie Mac and Fannie Mae
• A.I.G. needed money because it had backed $57 billion in insurance contracts relating to subprime real-estate investments.
• Subprime mortgages are still causing damage.
• Impact on the average person, credit extended to us will be harder to come by.  
• All investment banks will have to learn, and secure more funding — or worry about the same fate.