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Run on Big Wall St. Bank Spurs Rescue Backed by U.S.

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RedEarth Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 11:53 AM
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Run on Big Wall St. Bank Spurs Rescue Backed by U.S.
March 15, 2008
Run on Big Wall St. Bank Spurs Rescue Backed by U.S.
By LANDON THOMAS Jr.
Just three days ago, the head of Bear Stearns, the beleaguered investment bank, sought to assure Wall Street that his firm was safe.

But those assurances were blown away in what amounted to a bank run at Bear Stearns, prompting JPMorgan Chase and the Federal Reserve Bank of New York to step in on Friday with a financial rescue package intended to keep the firm afloat.

The move underscores the extreme stresses that the credit crisis has imposed on the financial system and raises the once-unthinkable prospect that major Wall Street firms might fail.

The developments may only postpone the eventual sale of all or part of Bear Stearns, which has had crippling losses on mortgage-linked investments. To keep the 85-year-old firm solvent, JPMorgan, backed by the New York Fed, extended a secured line of credit that gives Bear Stearns at least 28 days to shore up its finances or, more likely, to find a buyer.

News of the bailout ignited fears that other big banks remain vulnerable to the continuing credit crisis, and stocks tumbled in another rocky day for the markets. Financial shares led the way, with shares of Bear Stearns plunging 47 percent. Hours after the rescue was announced, another Wall Street firm, Lehman Brothers, said it had secured a three-year credit line from banks. Its stock fell 15 percent.

http://www.nytimes.com/2008/03/15/business/15bear.html?...
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