Yesterday it was Morgan Stanley who lost money and today its Bear Stearns. The sub prime mortgage market is part of the problem, and no doubt there are a dozen Harvard MBA’s right now trying to figure out how to blame the loss on anyone but themselves.
The losses of these two financial giants is disturbing enough, but the biggest red flag I see is to who they have turned to patch their leaky financial ships. Both companies went to the Chinese to shore up their stocks. Bear Stearns swapped stock with Citic Securities and Morgan Stanley got a $5 billion cash infusion from government-controlled China Investment Corp.
The stakes are pretty high in this game, and right now it looks like China is getting a bigger and bigger share of American debt. Not only do we buy cheap goods from China, we borrow the money to do it! This whole thing sounds like the beginning of a collapsing house of cards. I am reminded of the dot com bust and have to wonder what new scandals will be on the horizon.
Glad I am not in the financial sector right now.
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