David Kirkpatrick

March 14, 2008

Bear Stearns reaches for bailout

Filed under: Business, Media — Tags: , , , , , — David Kirkpatrick @ 9:52 am

The media may be reporting mixed signals, but the US economic crisis is going nowhere.

From the linked NYT article:

Bear Stearns, facing a grave liquidity crisis, reached out to JPMorgan on Friday for a short-term financial lifeline and now faces the prospect of the end of its 85-year run as an independent investment bank.

With the support of the Federal Reserve Bank of New York, JPMorgan said in a statement that it had “agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days.”

Update — Here’s a CFO.com article with more on this issue and about government financial regulation in general.

From the CFO.com link:

Treasury Secretary Henry Paulson, now dealing with his very own horror show in the melting credit markets, can probably relate.

Paulson, the former chairman and CEO of Goldman Sachs, has strived to regulate the financial markets with a light touch. Yet the most recent report of the President’s Working Group on Financial Markets, which Paulson chairs, shows financial regulators are being pulled inexorably by the worsening credit crisis to use a heavier regulatory hand, or even to intervene directly in the market.

Indeed, today, just one day after the report was released, the Federal Reserve was forced to back a bailout of Bear Stearns. And earlier in the week, the Fed poured some $200 billion of liquidity into the market. The report of the President’s Working Group itself contains recommendations that translate into increased regulatory oversight of everything from credit rating agencies to banks to institutional investors to mortgage brokers. The report also recommends that regulators intervene with other standard-setting bodies, notably the Financial Accounting Standards Board and the Basel Committee on Banking Supervision.

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