Bear Stearns, the investment bank & Wall Street icon, is in talks to be acquired… quickly. As I wrote about a few days back, Bear is in serious trouble and is on life support thanks to the quick intervention of JP Morgan and Fed. After a week’s worth of posturing about the strength of it’s portfolio, Bear quickly reversed course on Friday and was promptly rewarded by having it’s stock price knee-capped.
The lifeline provided by Morgan is apparently a short one, for word this weekend is that Bear is looking to be sold in the next few days to avoid filing bankruptcy.
This is probably the tip of the proverbial iceberg, folks. A lot of the big banks and investment houses bet heavily on mortgage-backed securities, and as time goes on the gangrene in the mortgage market is slowly climbing it’s way up the food chain. Now, the ‘Alt-A’ market is starting to experience the same stress that the subprime one has for the last year or so. This is going to get uglier before it gets better. Hang on for what promises to be an interesting 2008 election cycle.
On a related note, the ‘intentional foreclosure’ movement is branching out away from the main stress zones of Southern California, Nevada, Florida, etc. My local paper has an article running right now about the growing number of Minnesota families choosing to sacrifice a house and keep the cars, credit cards, etc. The article quotes bearish economist Nouriel Roubini and his pessimistic views of the situation and then goes on to quote some real estate/mortgage types who dispute the idea that a new generation of ‘callous customers’ is growing that would walk away from a home that has become a bad business deal. I had no idea that it’s callous to try and find the best way to right one’s financial ship. How dare we stiff those noble mortgage companies that were so eager to sell people toxic paper in order to turn quick profits? The borrowers are paying the penalty for not being well-informed before signing on the line, but the lenders are equally guilty of pushing crap to make a quick buck.