Elanso

By : Larry Elliot

Forget talk of soft landings. Ignore those who say that the Federal Reserve is in control of events. Take with a pinch of salt suggestions that the problems at Bear Stearns are a one-off.
The rescue package orchestrated for America's fifth-biggest investment bank makes it abundantly clear that this is now a different sort of market and a different sort of crisis. It is no longer hyperbole to state that the US is facing the most serious threat to its financial system since the Depression of the 1930s.

After days of denying market rumours that it was in trouble, Bear Stearns eventually came clean today and said that it had been forced to seek help from a combination of JP Morgan and the New York Federal Reserve as a result of a deterioration in its financial position in the past 24 hours.

Bear's problems have, however, been building up for a lot longer than that, and the talk of a sudden descent into crisis looks like an attempt to prevent US regulators taking an interest in whether the bank has been trading under false pretences this week.

Like Northern Rock in the UK, it was the bank that was most heavily exposed to the sub-prime meltdown in the American real estate market. Like Northern Rock, it was singled out as the limping wildebeest struggling to keep up with the herd. And like Northern Rock it has been the victim of a bank run, only this time the run has involved other banks selling its shares short rather than customers turning up to withdraw their savings.