One of the major Wall Street firms just sold itself for about 6% of its value as of Friday, and analysts somehow see this as a positive sign for the economy? Bear Stearns, which had a market capitalization of over $3.5 billion on Friday, will go for a mere $236 million today to JP Morgan, who can apparently absorb the crash of Bear Stearns’ credit business. The Fed and JP Morgan attempted a bailout last week, but it apparently wasn’t enough.
As I have said, the market is responding just like it should in the credit crisis. People and institutions are paying the price for their bad decisions. I can guarantee you that there will be a whistleblower coming up soon from Bear Stearns who will let slip the poor decisions and bad policy that lead to a 94 percent reduction in the value of the Bear Stearns stock. I can't imagine what this is yet, but it will be juicy to be sure.
The sad fallout has yet to come as once the details of Bear Stearns's screwups come to light, there will be rules, a la Sarbanes/Oxley coming down the pike and we won't have any chance to really stop it.
Man, am I glad I just refinanced my house with a nice secure (relatively) low interest fixed mortgage. I fear that if my wife and I had waited, we would have been screwed.