By Andrew (Business Editor)

The collapse of Bear Stearns is the biggest headline event in this credit crunch. While JPMorgan may have leapt to the rescue, it is hardly an event that will be quickly forgotten. Few consumers will have dealt directly with Bear Stearns, due to the nature of its business, however it was a giant in the banking and investments sector and its absorption by JPMorgan will change the landscape of the sector. Will it be the last major collapse? Can we hope that the rest of the system is not a house of cards? What’s worse is that this collapse happened during a period where the world’s central banks have lent the banking system billions of dollars.

Beyond lending, new plans are afoot in the U.S. to try and steady the ship. Today the Treasury Secretary Henry Paulson, is due to announce an overhaul of the financial regulatory system. There is a long list of proposed changes, although it should be noted that these changes will require congressional approval. The changes are to increase the amount of regulation and oversight in the financial sector, possibly an admission that the laid-back free market approach taken by the Bush administration is not suitable for the current financial climate. The administration clearly appears to be fighting hard to keep the American economy out of recession, or at least shorten its length. It will be interesting to see how the markets react to these proposals, whether they ever get approved or not is another matter.

On the markets, gold appears to have become a more interesting marker than oil, with which it traditionally rises and falls. Gold has fallen back from the $1000 mark, due to small signs of strength in the Dollar. This strength comes on the back of better than expected results in the recent consumer spending figures. These “good news” stories, would seem to suggest that the current troubles will cause a more gentle slowdown of the economy and not a single crash. It seems that while the large corporations are already feeling the full force of the crunch, the average consumer is not yet being hit by its worst effects. Whether this means its eventual bite will be worse, time will tell.

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Tags: bear stearns, dollar, Fed

This entry was posted on Monday, March 31st, 2008 at 9:44 am and is filed under business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.