Written by A.J. Brown

The Bear on Wall Street

Bear on Wall StreetToday is an interesting day in the markets (to say the least).

Troubled financial firm Bear Stearns was valued at $3.54 billion on Friday evening. This morning, JPMorgan Chase bought the company for $236 million in an emergency fire sale. Angry Bear Stearns stockholders are already calling in the legal beagles in the hopes of some kind of recourse.

Of course, the news caused the market to panic, which then prompted the Fed to step in with more rate cuts. And even more rate cuts are expected. (The Fed meets again tomorrow, March 18.)

In another unusual move, the Fed agreed to fund up to $30 million of Bear Stearns’ "less liquid assets" to grease the purchase deal. Furthermore, the Fed announced a new lending facility that will assist not only banks, but non-bank lending institutions as well.

MSN Money reports on the situation:

"This is the first time since the Great Depression that the Fed has extended financing to non-banks," Merrill Lynch North American economist David Rosenberg wrote in a note to clients this morning.

While some view the sale of Bear Stearns and the Fed’s recent actions as positive moves for the market, there are many dissenting voices. From the same MSN Money article:

"Today’s moves by the Federal Reserve are the desperate acts of failing men," Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission, wrote in a note to clients late Sunday. "The threat of contagion and wholesale breakdown is on a scale of 1929 is real."

It seems the Bear on Wall Street is alive and well. What do YOU think? Leave a comment and let me know your thoughts.

Best regards always,

A.J. Brown

Categories: Blog / News

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  1. Economic Meltdown Imminent | Debt Reduction Formula @ 10:09 am (Pingback)

    [...] Kranyak left a comment on A.J.’s Option Trading Blog. With regard to problems in the banking industry, he says, [...]

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