Wednesday, April 16, 2008

The Financial Crisis In America

Nearly a month ago an event took place that quietly slipped past the radar of most Americans involving Bear Stearns, one of the largest global investment banks, securities trading and brokerage firms in the world. On March 16, under the supervision of the Federal Reserve, Bear Stearns signed a merger agreement with JP Morgan Chase.

The merger was brought about as a result of Bear Stearns loss of $29 billion dollars incurred by investments in mortgage-backed securities and exotic investment paper. Had JP Morgan Chase, and most importantly the Federal Reserve not stepped in to bail out Bear Stearns, a global financial meltdown would have ensued.

The stock market crash in October of 1929 brought about the great depression. The Bear Stearns incident would have been worse – much worse.

It all started with sub-prime lending and interest-only loans to millions of Americans that didn’t have the financial means to purchase a home. Bear's default rates on Alt-A mortgages that it underwrote also indicates its lending practices were lackadaisical during the real estate boom. As of February, according to Bloomberg data, 15 percent of these loans in its underwritten securities were delinquent by more than 60 days or in foreclosure. - The World According To Moondog

The article also examines who owns the Federal Reserve.

1 comment:

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