If Bear Stearns can go so quickly, what else is out there? That is the question being asked today. Investors seem to have taken the view they will sell out now and wait for the answer later.
With UK banks still sharply lower, the signs are that American financial stocks will open down as well. There have already been suggestions of $1bn (£500m) write-offs at Lehman Brothers, which is one of a number of US banks reporting tomorrow. Lehman shares are down 34% - yes, 34% - in pre-trading with Merrill Lynch down 15% and Goldman Sachs nearly 10% lower.
There are also rumours that Swiss bank UBS might need to raise cash and/or cut 8,000 jobs.
Back in the UK, three-month libor - the level at which banks lend to each other - has jumped again, up from 5.931% to 5.958%. And this despite the attempts by the Fed and the Bank of England to improve liquidity. Indeed the Bank's £5bn emergency offer of three-day loans was reportedly five times oversubscribed.
Meanwhile strategist Barry Ritholtz makes some good points about the Bear Stearns bailout on his blog:
He writes: "Could JP Morgan really complete a thorough due diligence on all of Bear Stearns' crappy paper, leveraged risk, and counter-party obligations in two days? I doubt it. Hence, the $30bn backstop from the Fed. Not quite free market capitalism, but definitely creative, and certainly destruction.
"JP Morgan now gets a terrific scapegoat for the next 4 (or 8 or 12) quarters to blame for all of their crappy paper, leveraged risk, and counter-party obligations: Bear Stearns."
