Commodity Online
MUMBAI: What commodities investing legend Jim Rogers told Commodity Online in an interview seems to be the true reasons that led to the unprecedented financial problems plaguing banking gians like Lehman Brothers, Merrill Lynch and AIG.

The US Federal Reserve has decided to lend $85 billion to AIG to save the world's largest insurer from bankruptcy and collapse. But the senior management of AIG would be fired as the US government feels that the insurance company was 'mismanaged' by the top brass.

Rogers said that "gigantic amounts of leverage caused by a few totally incompetent people within the firms" have led to the collapse of Lehman Brothers and problems plaguing Merrill Lynch and AIG.

The US government would take control of 80% of AIG. The moved is designed to keep the company out of bankruptcy and keep its liquidity problems from snowballing to the rest of the economy. The December US T-bonds ended up 10/32nds at a new contract high of 121.30/32nds on Wendesday.

Meanwhile, the US Census Bureau said that housing starts were at an annual rate of 895,000 in August, down 6.2% from July's pace and weaker than expected. It was the weakest month for housing starts since 1991. November lumber fell $5.50 to a new contract low of $213.50.

The Mortgage Bankers Association said that mortgage applications jumped up 88% last week with 52% of the business coming from homeowners refinancing their existing mortgages at lower rates.