Bear Stearns forced to ask for bail out
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Welcome to interest.co.nz's morning briefing of what's news here and around the world. Everything you need to start the day in 90 seconds at 9'oclock.... Starting now
With news over the weekend that America's fifth biggest investment bank Bear Stearns was forced to go cap in hand to the US Federal Reserve and JP Morgan to ask for a bailout after a run on its funds and a crisis of confidence threatened to drain its US$17 billion of cash reserves within days.
Rumours it was in trouble became self fulfilling when other banks stopped dealing with Bear Stearns fearing it may not be able to settle deals.
This is a stunning piece of news. It essentially says that fear and panic rule on Wall St right now. Wall St fell sharply and Bear Stearns' shares fell 50%.
This shows just how worrying the global credit crunch has become. It has already increased New Zealand fixed mortgage rates by around half a percentage point. As global investors become more nervous, they are demanding higher interest rates to compensate for the risk.
We borrow over10 billion dollars a year from international investors. When they demand higher interest rates, we have to pay.
Meanwhile in another ominous sign for the housing market, the mortgagee sales index compiled by www.interest.co.nz recorded a 7% rise in mortgagee sales llistings on trademe and realestate.co.nz in the last week to 226. The number of listings in Auckland rose 19% in one week to 108.
That was 90 seconds at 9 o'clock. I'm Bernard Hickey for interest.co.nz.