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Jeremy Siegel on Bear Stearns, Rate Cuts and the Looming Threat of Inflation
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Jeremy Siegel on Bear Stearns, Rate Cuts and the Looming Threat of Inflation

Knowledge at Wharton·Knowledge at Wharton Staff·about 1 month ago
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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 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?…

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