Bear Sterns is busted.
They got caught with less money than they need on hand, so they went looking for a quick infusion of cash to avoid a run on the bank.
Trouble is, the mere whiff of a bank in default, the slightest possibility that things are awry, and it’s Game Over.
Why is the financial sector as a group in the collective toilet right now?
Are they all broke?
Did they all produce skanky loans?
But guilt by association is sufficient to sink the ship. Bear Stearns is basically bare sterned.
Or bald faced.
The CEO of BS (coincidental acronym?), Alan Schwartz, four days ago stood on his front porch and told the world that any speculation of a liquidity crunch in his shop was “ridiculous, absolutely ridiculous.”
Today he told us that Bear Stearns’ credit position in the past 24-hours had “deteriorated significantly.” More like Bear Stearns’ perception of its position crystallized significantly.
These people have been living in glass houses wearing rose colored glasses drinking their own private label Kool-aid for way too long.
But to protect against the “possibility” the rumor of illiquidity “might be true,” Bear Stearns turned to J.P. Morgan for a quick injection of, say, oh, $3-to$5-billion, deliverable within the next couple of days.
Sounds more like a move to avoid an eventuality to me.
Either way, it reeks.
Apparently, Standard & Poors agrees, dropping its rating on the dancing Bear to BBB—that’s one level above junk status.
What's that make it--trashy?
So much for hunky-dory.