Bear Stearns Investment Bank Sold, Fed Cuts Rates

JP Morgan Chase agreed Sunday night to acquire rival Bear Stearns, and the U. S. Central Bank cut lending rates to banks - both actions aimed at averting a spreading credit crisis that is threatening to plunge the U.S. economy into recession.

The deal values Bear Stearns at about $250 million, far less than the $4 billion market value at the end of this week and signaling a stunning collapse for one of the world’s largest and most respected investment banks. The U. S. Central Bank - the Federal Reserve - is expected to help fund some of the transaction.

The deal occurred at about the same time Sunday evening that the Fed announced it would cut its lending rate to financial institutions a quarter point to 3.25 percent.

At the same time it created a new lending facility, to take effect Monday, that will allow big investment banks access to short-term loans.

Analysts said Sunday evening the activity was designed to provide some resolution to the latest crisis in confidence before Monday’s markets open.

Bear Stearns employs thousands worldwide in cities such as London, Tokyo, Hong Kong, Beijing, Shanghai, Singapore, Milan and Sao Paulo.

Some information for this report was provided by AP, Bloomberg and Reuters.

by VOA News

Net News Publisher