Busted: Bankers and The Global Economy

March 14, 2008

Bear Stearns in Danger; Economy Stressed

bear-stearns.jpgJPMorgan Chase announced that in conjunction with the Federal Reserve Bank of New York it will provide temporary funding for Bear Stearns, the fifth-largest investment bank. The funding will be provided as necessary for up to 28 days. During this period, JPMorgan Chase will assist Bear Stearns find permanent financing. Bear Stearns says its liquidity significantly deteriorated over the past day and the temporary funding will help it continue operating normally.

The investment bank added there is no guarantee that any permanent strategic alternatives will be successful. According to the AP, the central bankers tapped a rarely used Depression-era provision to provide loans, and said they were ready to provide extra resources to combat an erosion of confidence in America’s biggest financial institutions.

Nearly half the value of Bear Stearns, or about $5.7 billion, was wiped out in a matter of minutes as investors decided the bailout signaled that the credit crisis has reached a more serious stage, and now threatens to undermine the broader financial system and the U.S. economy.

Additional information from the Fed

A few loners have been very much ahead of this economic situation. Last night, President Bush admitted trouble in the economy after three and a-half months of “chin-up exercises”. More bailouts are in the air with large banking institutions, even as early as next week. The movements of the Federal Reserve in advance of this latest news were clearly not a coincidence, but a preparation for the inevitable while wearing a brave face to the public-at-large. Interestingly, the public has not held much interest even though their interests are keenly at stake. ~ E.M.


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