News: Bear Stearns get emergency funds
Mar. 14th, 2008 11:09 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
stinglikeabeeIt's grey. Uniformly grey. Without a white fluffy cloud in sight. I'm not looking forward to the cool weekend.
It seems suitable, however, for today's news of Bear Stearns seeking financial help. From the BBC: US bank Bear Stearns has got emergency funding, in a move that raises fears that one of Wall Street's biggest names is on the verge of collapsing. JP Morgan Chase will provide the money to Bear Stearns for 28 days with the Federal Reserve of New York's backing. JP Morgan is also trying to get long-term financing for Bear Stearns. Bear Stearns' problems stem from the global credit crunch and the worry is that other lenders may also have major funding problems, analysts said. Bear Stearns is Wall Street's fifth largest investment bank, and has been at the centre of the US mortgage debt crisis. Recently, speculation had intensified that it was struggling to fund its daily business.
Why is this big news other than the Auntie Beeb telling us it is so? Bear Stearns' main business is a big player in the capital market. In my job (the one I had to leave) I helped track the activities of Bear Stearns, which had its fingers in investment banking, clearing services, merchant banking, and advisory services pies. The company is the grease in many mergers and acquisitions, providing services that help value a target company more accurately, help small companies raise a round of funding, provide loans to companies... A collapse of Bear Stearns not only spells disaster for its creditors and employees, but its clients as well. There may be other similar companies willing to step into the void left by Bear Stearns, but their creditors may feel less comfortable in investing new funds. Combined with the history and name recognition of Bear Stearns, it may be enough to spook investors in the stock market and drop their shares in panic.
While people are still dancing around the word 'recession', a City analyst yesterday used the depression to describe what's to come. He wasn't thinking of 2008, but as the economy is cyclical, his view was of a long period of recession as bad as what's happened in the '30s. I want to dismiss this as scaremongering, but can't. Crude oil is over $100 a barrel, people seeking for a 'safe' investment raise gold prices to $1,000 an ounce, homeowners are defaulting on their loans. The current business environment is one of regret and fears of redundancies. I've had a talk with several who have admitted they will let go of many in their offices, it's just a matter of when.
If I were still in work I know the first thing to do is shore up the savings. Instead of savings to last for 3 months, make it 6 months. Make your rent/home loan/debts a priority, cut down on things like food, clothes, and yes gas/petrol for the car. LA Mayor Antonio Villaraigosa wants city employees to accept days of non-paid leave to ease its financial burden, this might be something to bring up with HR. Based on my source in the financial services sector, this isn't a layoff where they'll get rid of underachievers -- this is a massive layoff where they have to shut entire divisions down because there's no money to support such operations.
I'm sure those in other industries will fare much different, but the good times are truly over.
It seems suitable, however, for today's news of Bear Stearns seeking financial help. From the BBC: US bank Bear Stearns has got emergency funding, in a move that raises fears that one of Wall Street's biggest names is on the verge of collapsing. JP Morgan Chase will provide the money to Bear Stearns for 28 days with the Federal Reserve of New York's backing. JP Morgan is also trying to get long-term financing for Bear Stearns. Bear Stearns' problems stem from the global credit crunch and the worry is that other lenders may also have major funding problems, analysts said. Bear Stearns is Wall Street's fifth largest investment bank, and has been at the centre of the US mortgage debt crisis. Recently, speculation had intensified that it was struggling to fund its daily business.
Why is this big news other than the Auntie Beeb telling us it is so? Bear Stearns' main business is a big player in the capital market. In my job (the one I had to leave) I helped track the activities of Bear Stearns, which had its fingers in investment banking, clearing services, merchant banking, and advisory services pies. The company is the grease in many mergers and acquisitions, providing services that help value a target company more accurately, help small companies raise a round of funding, provide loans to companies... A collapse of Bear Stearns not only spells disaster for its creditors and employees, but its clients as well. There may be other similar companies willing to step into the void left by Bear Stearns, but their creditors may feel less comfortable in investing new funds. Combined with the history and name recognition of Bear Stearns, it may be enough to spook investors in the stock market and drop their shares in panic.
While people are still dancing around the word 'recession', a City analyst yesterday used the depression to describe what's to come. He wasn't thinking of 2008, but as the economy is cyclical, his view was of a long period of recession as bad as what's happened in the '30s. I want to dismiss this as scaremongering, but can't. Crude oil is over $100 a barrel, people seeking for a 'safe' investment raise gold prices to $1,000 an ounce, homeowners are defaulting on their loans. The current business environment is one of regret and fears of redundancies. I've had a talk with several who have admitted they will let go of many in their offices, it's just a matter of when.
If I were still in work I know the first thing to do is shore up the savings. Instead of savings to last for 3 months, make it 6 months. Make your rent/home loan/debts a priority, cut down on things like food, clothes, and yes gas/petrol for the car. LA Mayor Antonio Villaraigosa wants city employees to accept days of non-paid leave to ease its financial burden, this might be something to bring up with HR. Based on my source in the financial services sector, this isn't a layoff where they'll get rid of underachievers -- this is a massive layoff where they have to shut entire divisions down because there's no money to support such operations.
I'm sure those in other industries will fare much different, but the good times are truly over.
no subject
Date: 2008-03-14 06:42 pm (UTC)I'd shoot for a year.
And yes, the credit crunch/overextension is going to bite *all* of us in the asses.
no subject
Date: 2008-03-14 06:54 pm (UTC)