Monday, March 24, 2008
Podcast: Bear Stearns, Rate Cuts and the Threat of Inflation
Today's podcast from The Wharton School covers the past week's news developments on Wall Street and features a video interview with Professor Jeremy Siegel, as well as the usual audio versions. The Slatin Report also has a good read on it from a bit more of a NYC real estate perspective in Bear Bites Bear
Jeremy Siegel on Bear Stearns, Rate Cuts and the Looming Threat of Inflation
The ongoing credit crisis in U.S. financial markets has claimed a huge and high-profile victim: Bear Stearns, the Wall Street investment bank and securities brokerage firm. After being slammed by what amounted to a run on the bank during the week of March 10, Bear Stearns was pushed to the brink of bankruptcy and then agreed to be acquired -- for $2 a share -- by JP Morgan Chase over the weekend. Federal Reserve chairman Ben Bernanke and Treasury Secretary Henry Paulson played an active role in the transaction, largely because of the potential impact that a major bankruptcy might have on confidence in the financial markets. That same day, the Federal Reserve lowered interest rates -- as it did again on March 18, by three-quarters of a percentage point.
As the credit crisis shows no signs of easing, are other Wall Street firms likely to follow Bear Stearns into oblivion? Will the Federal Reserve's efforts help to boost confidence in the financial system among U.S. and international investors? Finance professor Jeremy Siegel, author of The Future for Investors, discussed these questions and more with Knowledge@Wharton.
A transcript of the conversation follows: