It looks well contained in the equity markets to me. We’ll see. Someone must think JPM got a steal though to bid BS up.

LEH is down $15; Fed went all in and lost. NEw game.

The issue wasn’t the collapse of the stock price, that was symptomatic of the fact that customers were closing accounts and counterparties were refusing to trade with Bear and sending business elsewhere. Bear’s $17 billion reserve of cash and equivalents evaporated between Tuesday and end of day Thursday.

There is no mechanism for halting trading in credit markets or OTC derivative markets, where most of the action is. This paper does not trade on exchanges, which is why counterparty risk is a big deal.

By the way, does anyone find the 2 dollar per share value a little funny? Normally in these kind of circumstances the company is bought for a dollar a share. Was 2 settled on so that BS could hold up their heads high with the claim that these was really a take-over and not a bankruptcy?

Bear’s financial obligations are intact, its shareholders lost 90+%, and management wil be out the door RSN. Very smooth, IMHO.

I hate to be a stickler, but there are two differences.

The Fed (or the feds) is not responsible for managing Bear. JPM can actually fire a lot of the employees once it takes over. Uncle Sam wouldn’t have the foggiest idea of what to do (it might figure out something, but the lack of an operational strategy would look pretty poor). Keeping all those bodies around (when the Street is stealing all the clients, so revenue collapses) would be costly, and it would have to keep the top brass, which would look pretty bad.

The Fed is only on the hook for $30 billion. That’s I believe 5% of Bear’s balance sheet if you accept its financial statements (which JPM says it does, but how can you be sure with all those OTC trades?)

BofA thought it got a deal with Countrywide, remember? If things get really bad, the Fed may not look as dumb as it looks right now.

Yves has been writing every day for quite a while. He’s been I’d say at least 90% accurate. People like Nouriel Roubini were dismissed as hysterics have been proven right.

Show me your record of predictions and maybe I’ll take you seriously. If you want to point to hysterics, I’d put the Fed at the top of the list. If the people in charge are clearly desperate, isn’t that a sign that things are precarious?

Excellent analysis. That is exactly it. It’s a charade.