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Feeling Wall St.'s pain, from Manila to Paris

Nearly 5,000 miles from Wall Street, Dmitry Zhiltsov's recruiting agency is bleeding clients, as investment banks that once hunted Russia's financial wizards succumb to the U.S. meltdown. Flipping on the morning news, he wonders: Who will fall today?
/ Source: The Associated Press

Nearly 5,000 miles from Wall Street, Dmitry Zhiltsov's recruiting agency is bleeding clients, as investment banks that once hunted Russia's financial wizards succumb to the U.S. meltdown. Flipping on the morning news, he wonders: Who will fall today?

He watches the real estate market, too. If housing prices dive in his hometown of St. Petersburg, and his business dries up and banks limit lending, who will pay his $3,000 monthly mortgage?

"It's like I'm ... waiting for the collapse," he said by telephone from his kitchen, a few blocks away from the shore of the Baltic Sea.

Transactions gone sour in a compact corner of Manhattan have triggered a historic government rescue plan for the world's biggest economy and poisoned global finance, disrupting markets that trade everything from sugar to credit.

Many ordinary people from Algiers to New Delhi have watched Wall Street degenerate on TV as if it were a gruesome spectator sport, its casualties limited to American homeowners and investment bankers. But it is also taking a toll on lives less clearly linked to what's gone wrong.

In Zhiltsov's kitchen, his wife Yulia cooks their two sons porridge while he scans Russian news channel Vesti-24, CNBC, CNN.

"The banks, the brokerages, that's what I'm looking at," since they are his main clients, he said.

He's watching U.S. companies, multinationals — and Russian firms. Moscow's financial markets and booming companies have swooned in recent weeks, partly under the avalanche of bad news in New York.

Worried in Hong Kong
A continent away, Hong Kong homemaker Elaine Law's world is swooning, too.

She's had a hard time eating and sleeping lately, and says she even contemplated suicide out of fears about the fate of her family's $70,800 savings in a financial instrument linked to Lehman Brothers.

The investment bank's demise three weeks ago set the wheels in motion for the $700 billion U.S. government bailout that the House approved Friday.

"We were very confident about the market. Who would have thought it would dive and a big bank like Lehman would collapse?" asked Law, 59.

As world financial markets grew more sophisticated in recent years, more and more regular households shunned basic savings accounts and entrusted their money to complex and promising investments whose risks few non-specialists understand.

Last year, Law and her retired civil servant husband bought something called an equity-linked note issued by Lehman through Citibank (Hong Kong) Ltd, she said.

But two things went wrong.

The note's value was linked to the performance of two major Chinese banks in the Hong Kong stock market. Those banks' stocks have tanked, diminishing the value of the investment.

Then Lehman crashed, and now Law is unsure whether she can get back what money remains when the note reaches maturity next month.

"We've already started to buy and eat cheap," Law lamented. Her husband cannot work because of chronic illnesses. "How are we going to save up that money again?"

Regulators have received more than 3,500 complaints related to Lehman Brothers investment products in Hong Kong, where the outstanding value of Lehman-related products amounted to about $2 billion.

Layoffs in the Philippines
Jobs, too, are falling prey to the U.S. financial crisis, as far away as the central Philippine city of Cebu.

Michael Basubas's furniture export company in Cebu, which depends mainly on U.S. customers, has slashed his 200-strong work force to 80 since last year.

"Housing in the U.S. has been affected by the subprime mortgage crisis ... so there are no houses where we can put our furniture," Basubas said.

His company's furniture wholesaler clients in the U.S. are struggling to sell their goods, and would rather hold on to their cash instead of slow-moving inventory.

Orders at his company, Diamond Cane International Inc., have nearly dried up, forcing Basubas to retrench workers and close one of his two factories and cut services of at least 30 of its 40 subcontractors.

Before the financial crisis hit, the Philippine export industry was already reeling from high oil prices that have driven up production costs and from the appreciation of the peso against the U.S. dollar.

Basubas, who has been in the business for 22 years, calls this "the worst time."

His company's yearly sales were between $2.13 million and $4.25 million in the past, but he said "we will be happy if we hit 50 million pesos ($1.06 million) this year."

He said exporters are banking on a change in the U.S. administration to perk up demands for their products, but expect that "from now until mid-next year, it will really be tough times."

Unable to get a loan in France
Tough times are also on the menu for Xavier Guimard, who manages a brasserie in the city of Compiegne in northern France.

He sought a loan earlier this year to buy the business from the longtime owner.

But that was just as credit markets were tightening along with bank's loan requirements, and he says he was turned down by his bank Credit Agricole because he didn't have enough capital.

The owner, lacking a buyer for the business, plans to shut down the restaurant Dec. 31 and sell the property to the city government. His dream of ownership down the tubes, Guimard will soon be out of a job, too.

"It was not a good time" to ask for a loan, he said. "I didn't want to believe the headlines about ... crisis and all that."