Bear-Stearns Collapse

March 18, 2008

In my “2008 Predictions,” you’ll find the following:

“Long-Shot Prediction: There will be at least one Enron-style collapse of a major financial institution as off-balance-sheet schemes unravel.”

I thought that it was a long shot but, less than three months into the year, it’s already happened!  True, JPMorgan-Chase and the Fed precluded an actual bankruptcy of Bear-Stearns, but only by a technicality.  Bear-Stearns has been around a very long time.  They actually weathered the Great Depression, but couldn’t ride out today’s economic melt-down.  It speaks volumes about how bad things are getting. 

Don’t be surprised to see an even bigger financial institution go the same route in the coming days.  Still, the government does nothing to address the root cause of this mess – our enormous, persistent trade deficit.  Until it does, expect current conditions to persist.