Most of us knew this sad day would come. The feds announced earlier today that it is going to bailout Bear Sterns with the assistance of JP Morgan Chase (Chase Manhattan).

Bear Sterns announced today that it has secured financing through the Federal Reserve Bank of New York with the assistance of Chase Manhattan, which is being used to funnel the cash to Bear Sterns. Chase Manhattan will not be responsible in case of default by Bear Sterns. According to Bear Sterns' CEO Alan Schwartz "our liquidity position in the last 24 hours has significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."

The news came with a high price tag for Bear Sterns. After the news, shares of Bear Sterns were down over 40% and finished at a loss of just over 47%. This has definately added a new outlook to investors about the health of the economy and especially the financial sector, especially since Bear Sterns was the second largest investor of mortgages last year.

Worries at the Fed:

The feds are still concerned about the uncertanty of the financial markets and have pledged to continue to provide liquidity as necessary to stablize the financial system. Also, more and more analysts agree that the feds are going to be dropping the interest rates again when it meets next week. The current fed funds rate is at 3%, however most analysts and experts are expecting a drop between 75 and 150 basis points to bring the fed funds rate down between 1.5% and 2.25%.