Americas very own Northern Rock - Bear Stearns.
It has been confirmed this morning that JP Morgan has acquired bust top 5 US Bank Bear Stearns and after only 7 minutes following the market opening the FTSE is down 100 points.
It has been another week of troubles for the markets, and unfortunately more bad news is set to follow.
One positive however is that the Amercians are dealing with the problems and rapidly. I stated in my last blog on Thursday http://www.trumpo.com/blog/business/talk-of-american-interest-rates-to-go-down-to-0/ , and only 24 hours before the Bear Stearns news actually broke, that UK clearing banks were heading for the hills. It seems looking back on last weeks blogs, that the problems were known on Wednesday, but it appears that the snowball effect took over and the problems became to big and could not be sorted out behind closed doors.
I hope the UK learn from the US Govt and US financial powerhouses on how to deal with a financial crisis. Within 48 hours, emergency funding and an acquisition actioned for the good of the economy. It took us 6 months with Northern Rock and it may still have to be unravelled!
Trumpo thinks we need an emergency and confidence inspiring public meeting with the US and British Govt’s to get the financial wheels turning again before they actually fall off.
The world economy is now well and truly on the critical list!
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March 17th, 2008 at 10:17 am
As you say Trumpo, what a contrast between America and the UK. I often deplore the American way of shooting from the hip and thinking afterwards, but this appears to be sensible and swift action which is exactly what is required in the current circumstances.
Financial markets can deal with most bad news, but totally abhor not knowing the extent of problems and where the ultimate losses will end up. What they need is clarity.
This news from America contrasts markedly from the indecision on NR. We are told that some of the best brains in the country reside in the Treasury so are entitled to assume that they know what the problems are. Why therefore does it appear that there is a total lack of policy or direction. Are they in denial of the seriousness of the situation? or just frozen with fear of making a wrong call!
Perhaps Treasury officials should have one hand tied behind their back to prevent them from using the time honoured ‘on the one hand this.., on the other hand that..’ Or perhaps both hands tied back would prevent them from climbing up to ’sit on the fence’.
‘NEW’ Labour was built on ’spinning’ a story and trying to manipulate public opinion so one would have thought that they would have understood that public ‘perceptions’ and ’sentiment’ DO move markets and house prices as well as create ‘runs’ on banks!
Their perceived inaction or months of dithering can only be bad for all.
It may be opening up another area for discussion, or even contributing to conspiracy theories, but in the recent reporting season for the major banking institutions they all basically said ‘business as usual’, ‘profits up, not really effected by exposure to possible huge debts’ strikes me as strange because these very banks are all SO WORRIED about each others balance sheets that they refuse to lend to each other! Who is kidding who?
March 19th, 2008 at 12:34 pm
Bear Stearns made this announcement extremely soon after the FED announced it was making $200 bn available to help stabilise the US banking system in the event of further crises. Is this a coincidence?
March 21st, 2008 at 8:27 am
I’m afraid these disastrous “coincidences” keep occurring with monotonous regularity - strange isnt it !