Sunday, March 16, 2008

Bear Stearns crisis raises fears worse is yet to come

Agence France-Presse - 3/15/2008 1:40 AM GMT

The near-collapse of US investment giant Bear Stearns and its Federal Reserve bailout on Friday heightened fears that the worst is not over for the spreading global credit crunch.

Bear Stearns, among the hardest hit by the collapse of the US subprime, or high-risk, mortgage market, said it was getting an emergency loan from JPMorgan Chase backed by the Federal Reserve after its liquidity position had "significantly deteriorated."

The Fed meanwhile pledged "to provide liquidity as necessary to promote the orderly functioning of the financial system," a statement that highlighted concerns about the credit squeeze and its wider impact on the banks.

Traders said Bear Stearns's need for emergency funds spooked investors as a credit crunch sweeps Wall Street and concerns mount that a housing slump and rising job cuts could push the US economy into a recession.

"Obviously, the Bear Stearns story rapidly gave rise to worries that it might not be the only firm with similar problems," said Gregory Drahuschak, analyst at Janney Montgomery Scott.

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