On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government. The near-miss raised new alarm about the credit crisis — and whether other big firms might be in jeopardy.
The rescue came from JPMorgan Chase & Co. and, in an extraordinary step, the Federal Reserve, both rushing to pump new money into the venerable Wall Street firm after its financial state deteriorated so much in a 24-hour period that it threatened to fail.
Bear Stearns stock lost nearly half its market value, about $5.7 billion, in a matter of minutes, and pulled the broader market down with it. The Dow Jones industrial average fell nearly 200 points.
I'd been saying since the beginning of the year when the Gubment initiated the stimulus package that the reason why they did was to prevent one of the big banks from going under due to liquidity problems. Jim Cramer echoed the same sentiment a few nights later after a buddy of mine and I opined on it, but to be honest, I thought it would be Citi. The fact that its Bear Stearns is kinda shocking, since they were touted as being in a position of strength. The good news is that we're closer to the bottom. The bad news is that it's going to be a long long road back up.
The sad thing thats being entirely ignored is that people should be going to jail for this. Not only did the securities industry engage in downright illegal handling (not just unethical or risky), then took $38B (yes, B) in bonuses in 2007 for their handywork, but even CEO Schwartz lied to the market when he said that Bear was liquid. Folks, people bought stock based upon that comment and now they took a 50%+ haircut inside of 15 days. That's bullshit. The people that bought that stock could be your retired grandmother or your own 401k. You should be mad as hell and not wanting to take it anymore.
Near collapse of Bear Stearns sounds new alarm on credit crisis