The fallout from the sub-prime mortgage debacle, which has led to rampant foreclosures in Alabama and throughout the U.S., has taken it’s tole on a Wall Street icon, Bear Stearns. Over the weekend, J.P. Morgan, with help from the Fed, agreed to buyout (save from bankruptcy) one of their own. How did Bear Stearns go from a high powered 85-year-old Wall Street institution to being saved from bankruptcy by the government and it’s Wall Street neighbor? In short, hubris. Bear Stearnscontinued to bet big on sub-prime lending and the mortgage boom, even when other banks and investment firms were bracing for the coming mortgage crisis.
Many people have heard of the problems surrounding Countrywide Home Loans and other sub-prime mortgage lenders. What most people do not know is that these much maligned mortgage lenders are backed by prestigious Wall Street firms…Bear Stearns, Goldman Sachs, J.P. Morgan and Lehman Brothers. That means that the ticking time-bomb mortgage products that were hawked to homeownerse all across America by “bottom-feeding” sub-prime mortgage lenders, were in reality being backed by snobby, privileged and “connected” Wall Street brokerage firms.
What does this mean for consumers and homeowners? It means the enormous rise in foreclosures is having a bigger impact than lending institutions want to admit. It means things are worse than the “experts” thought. It means it’s not over. Look for more financial institutions to be hit hard…very hard. Look for more foreclousres…lot’s more. And finally, look out for your wallet; Wall Street is going broke and it will be targeted to make sure they get their money back.
For more information on the Bear Stearns buyout, read the New York Times article.
For more information on mortgage abuse, see David Campbell Smith’s blog.
If you have questions about mortgages, foreclosure, bankruptcy or any other consumer issue please contact me.