I was going to wait for lunch, but that may not be soon enough.
As of 10:20 today, Bear Sterns has lost 43% of its value, primarily because of this. The fact that the Fed and JP Morgan are going to step in and help out might seem good for Bear, but it's the fact that this is NECESSARY that has the market reeling. This is a far cry from statements Bear was making just, um YESTERDAY:
"We don't see any pressure on our liquidity, let alone a liquidity crisis," he [CEO Alan Schwartz] said.
They're going to have to stop trading on it I would think. It was almost at a 5 year low at the start of trading today, and it's down 40% from THAT.
In some sense, I think the general assumption that people felt that Bear was "too big to fail." i.e. that its failure would be so catastrophic that the market and feds would have to cooperate to keep it afloat because total collapse would hurt too many other market players. But these rumors of liquidity crunch at Bear probably are to a certain extent self-fulfilling. People start believing that there's a problem, then your default swaps and interest rates get more expensive, then people don't want to do business with you or take your credit, that makes it more expensive and fuels further rumors, etc.
(update finishing post 10:30 AM, hmm, got as low as 46%, now at 38% ... Who knows where (or if) it will level out)
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