Kids, it's going to start getting even uglier out there.
Sunday, March 16, 2008
Holy Forking Snit
Bear Stearns just sold itself to JP Morgan for $2/share. That's down from $30 at the close on Friday, $57 on Thursday and about $150/share a year ago. That's 99% of its equity value wiped out. The deal was rushed to make sure that Asian markets did not open before the banks balance sheet was shored up. The Fed stepped in on Friday because they didn't want a major bank to start defaulting on credit derivative counterparty agreements. If the market started to freak out that counterparties on these CDOs were not creditworthy, all hell could have broken loose.
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2 comments:
Just read about it - Stunning development. Wall Street panic Monday?
Probably not. With the Fed signaling that it is ready to open the window to investment banks to ensure liquidity, things should be depressed but not out of control. If Lehman suddenly announces that it is in liquidity trouble, however, there could be real panic.
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