NY Times: Fears That Bear Stearns’s Downfall May Spread

[marmar]

Fears That Bear Stearns’s Downfall May Spread
By LANDON THOMAS Jr.


The cash squeeze that brought Bear Stearns to its knees is fanning fears that other investment banks might be vulnerable to the crisis of confidence gripping Wall Street.

Investors are bracing for another volatile week in the markets as bankers and policy makers deal with the fallout from their bid to rescue Bear Stearns.

For now, the prospect of a new wave of consolidation in the beleaguered financial services industry seems remote. That is because would-be acquirers and everyday investors alike have lost faith in the values that Wall Street firms are placing on their own assets.

Of particular concern are the so-called marks placed on mortgage-linked investments like those that undid Bear Stearns, prompting a run on the firm that led the Federal Reserve and JPMorgan Chase to throw Bear Stearns a financial lifeline last week.

James E. Cayne, the chairman of Bear Stearns, mused eight years ago that he might consider selling the 85-year-old bank for a lofty price of four times what it values itself on its books. But now such a notion seems absurd — and not just for Bear Stearns.

The unhappy experience of Bear Stearns proves that it is a lack of confidence, not capital, that ultimately topples even the savviest financial institutions.

“Once you have a run on the bank you are in a death spiral and your assets become worthless,” said David Trone, a brokerage analyst at Fox Pitt Kelton.

In all-day meetings over the weekend, Alan D. Schwartz, the chief executive of Bear Stearns, met with his top executives at the firm’s Madison Avenue headquarters, trying desperately to persuade skeptical potential suitors that the firm was worth buying. .......(more)

The complete piece is at: http://www.nytimes.com/2008/03/17/business/17econ.html?ei=5087&em=&en=b25033a06bd9115f&ex=1205899200&pagewanted=print

[Mike03]

1. Excuse my French, but No Shit.

Lehman Bros, Washington Mutual, dozens of small local/community banks, and, most importantly Fannie Mae and possibly Freddie Mac.

It's not even close to being over.