Second Domino Falls: Feds Bail Out Bear Stearns
Countrywide Mortgage failed last year. Now a major investment company has gone under.
by Jeff Davis
The Federal Reserve has stepped in for the second time to rescue a major corporation swirling around the bowl. The first victim of our ongoing Housing Crash was the nation’s largest mortgage lender, Countrywide. Some sort of shotgun marriage was arranged with Bank of America to save Countrywide from outright bankruptcy. I doubt if Bank of America would take over a failing mortgage lender without some secret government guarantee that they won’t get pulled to the bottom like a row boat attached to a battleship anchor.
Now the investment firm Bear Stearns had to be rescued (although the ordinary investors saw their stock sink from $170 per share to $2 per share). Bear Stearns invested a little too much in home mortgages and that was enough to destroy a company that existed since 1923 with almost 14,000 employees. One wonders how many other firms will fail and how quickly the next dominoes will fall. (The Brits have already had to bail out one of their major banks that went bust, with taxpayer’s money, of course.) (more…)