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The market is dealt another tough punch with news out of Bear Stearns

 

The financial fate of an 85 year old financial institution may now be in the hands of the U.S. government.

The market was stunned to learn on Friday that Bear Stearns was in such bad financial shape that they were forced to borrow money directly from the Federal Reserve. The arrangement to borrow funds through the Fed's discount window over a 28 day period comes just days after the Ceo of the company claimed the brokerage firm was in good shape with their liquidity. Department not more than 48 hours later they were forced to change course. This is the larges news story from the problems within the credit market, directly tied into the falling U.S. housing market. Bear Stearns maintains one of the largest portfolios of mortgage backed securities of any company in the world and are very highly leveraged. The pressure will mount on the firm to find an acquisition partner either domestic or international if it is unable to improve its liquidity position. The credit markets have been spiraling down since last August and the Federal Reserve is scrambling for ways to provide added liquidity and help balance the markets out. This week the FOMC will be announcing on Tuesday an additional rate cut, anticipated anywhere between 1/2 to 1 full percent as they aggressively try to change the markets psyche. The next logical role is that the Fed will be directly purchasing mortgage backed securities as the market for these loan programs has all but disappeared.

3-15-2008 ? LoanNetwork.com

 

 

 

 

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