The credit crunch took its deepest bite into the US economy over the weekend, as the major investment bank Bear Stearns collapsed under the strain of massive debts. Shares that were worth $30 each on Friday were last night bought by JP Morgan for $2. In effect, it’s the American Northern Rock, and it places massive question marks over the stability of other US banks.
The US Federal Reserve has moved quickly to shore-up confidence in the system – cutting the lending rate for banks from 3.5 percent to 3.25 percent, and introducing a new lending facility. The worry is that these drastic measures merely reveal how serious the situation is, and could instead catalyse widespread investor panic. Already, share prices have tumbled in Asian markets. Will the rest of the world follow?
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