Mortgage Rate News

One of the most venerable financial institutions is taking a dive today as it is pulled from the brink of total collapse. JPMorgan has agreed to purchase Bear Stearns (for a paltry $2 a share — but, face it, at this point that might be considered generous) in order to save the financial sector giant from collapse.

In addition to an emergency Fed rate cut this weekend, the government was on the scene for the acquisition. The implications of the historic JPMorgan and Bear Stearns move are reported by ABC News:

“This is going to go down in very historic terms,” said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. “This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we’re probably heading into a recession.”

Many of the problems faced by Bear Stearns revolve around the subprime mortgage market and credit market crisis. Bear Stearns had invested heavily in risky loans, and is now paying the price.

Details of the plans JPMorgan has for the company are fairly uncertain at this point. The 14,000 employees of Bear Stearns will be unsure of their jobs, and JPMorgan has yet to announce what it will do with the brand that has lasted 85 years and even survived the Great Depression.

Even with this news, there is a very strong likelihood that we are headed straight for a recession (if we aren’t there already). All this further emphasizes the need for better, enforceable, national lending standards. National lending standards that are based on whether borrowers can afford the payments after a reset. It may mean credit that is more difficult to get, but it would also likely lead to a more stable economy.

Tags: JPMorgan Bear Stearns, subprime mortgage market, home mortgage loan, mortgage loan blog,
credit market crisi, emergency Fed rate cut, recession