Too Little Too Late?
JP Morgan (Chase) has offered to purchase the “ailing” Bear Sterns for $2.00 per share. Bear Sterns is essentially imploding due to their exposure to risky mortgage lending practices, selling interest only loans to people who barely understood what they were getting. Bear Sterns will not be the last institution to fall. The stock price has gone from a one year high of nearly $160 per share to next to worthless. JP Morgan might be able to survive this, we will probably only know for sure in five to ten years.
A housing market slowdown and what arguably looks like a recession have contributed to record foreclosures as people who have nothing left walk away from their homes as the value slides down and their payments ratchet up. Numerous rate cuts by the Fed have done little to slow down the rate increases that have spilled into the revolving credit card market. The so-called stimulus package approved by the government will push part of next year’s tax refund into people’s hands today. That’s all well and good today but it’s an advance and it will have to be paid back. Unfortunately, people will not see it that way next year when their refunds are cut or their tax bill increased - it will look like the shell game that it is.
