Comments on naked capitalism: Bear: Did the Fed and Treasury Push Too Hard?

If the Fed is willing to lend $29 billion for 10+ ...

2008-03-26T11:40:00.000-04:00

If the Fed is willing to lend $29 billion for 10+ years, collateralized by assets owned by Bear Stearns, why involve JP Morgan Chase at all?

Let your represenatives know that you are not goin...

2008-03-26T11:00:00.000-04:00

Let your represenatives know that you are not going to sit calmly and watch the Federal Reserve break the law
http://financialpetition.org/petition-impeach.shtml

Bear would not have failed Monday if they had acce...

2008-03-26T10:58:00.000-04:00

Bear would not have failed Monday if they had access to the Discount Window.

The vote to open the window to IBs was taken before the deal was made for Bear.

The Fed's active involvement in this transaction without disclosing this material piece of information (that would have instantaneously blown the deal up) is outrageous.

In effect The Fed has stolen $30 billion (now $29 billion) from the US Citizens and locked it up in an LLC - an "off balance sheet vehicle" just like Enron used - after conjuring the failure of Bear.

Yes, Bear was going to go down Monday. But so was Lehman, and by opening the Window, they stopped that.

Further, The Fed's actions were and are clearly outside of their authority as delegated by The Federal Reserve Act of 1913.

This crap has to be stopped kids. IF we contaminate our Treasury Bill repository (the largest piece of which, in the US, resides in The Fed) we run the risk of provoking capital flight and a collapse in our currency - and ultimately our economy.

All spending bills must originate in The House, by our Constitution. The Fed has no authority to "spend" $29 billion of our money without an explicit allocation by Congress. Period.

This demands investigation and, if the facts are as they appear, impeachment.

Yes, I said impeachment, as The Executive was clearly (by their own admission) involved.

Petition To Fix This and The Blog where this is all outlined

I'm with that other anonymous douche bag -- the re...

2008-03-25T23:43:00.000-04:00

I'm with that other anonymous douche bag -- the real problem here is one of punctuation. I bet if you'd just bother to proof read your posts BSC would still be trading north of $60.

SK-While I'm sure BSC people feel slighted, they'r...

2008-03-25T14:53:00.000-04:00

SK-

While I'm sure BSC people feel slighted, they're way off base for two reasons.

Firstly, the Fed didn't have it in for them. They were just the first IB to fail, and thus forced Fed action. The Fed did their best to put in place a guarantee ASAP (the main reason they went to JPM was because it was logistically easier to go through a regulated bank than spend a few days figuring out how to bail out BSC directly). If Lehman had failed before BSC, then they'd be the one facing BK, while BSC would have been saved. If BSC feels they were wronged, they should ask themselves why they were so incompetent that their IB went belly up first while others managed to hold on. That's the real reason for their current predicament.

Secondly, BSC shareholders should be thankful that they're getting $10/share. If it wasn't for the Fed, they wouldn't even get that. I'm still of the opinion that the Fed should have done nothing and let them go all the way to bankruptcy (even if that means Lehman and others would have quickly followed suit). BSC's problems have been known since last summer. Their stock price had already fallen significantly by the beginning of this year. If you still had BSC stock, you weren't some poor investor just trying to park your 401k in a safe company with no clue about the underlying turmoil in the company. You were a vulture investor speculating on distressed equity for a big payout. Such speculators should be thanking their heavens they're getting $10/share instead of the $0 that is their rightful due.

I have sympathy for BSC ( no shorts or longs in th...

2008-03-25T12:05:00.000-04:00

I have sympathy for BSC ( no shorts or longs in the stock ) shareholders because of the way the discount window was opened for primary dealers just after their sale, under threat of imminent bankruptcy, to JPM was done, under the auspices of the Fed and Treasury.

I know some say that it was to prevent problems to other primary dealers, problems caused to them BY BSC's problems - but if the window had been open to BSC maybe BSC's problem would have liquidated away and there would have been no problems for other primary dealers.

Its all speculation - but to me it looks like they wanted to make an example of BSC - and THEN put, what they see as a fix to the liquidity of primary dealers, in place.

Its playing favorites IMO - so much for wanting to protecting the system.
-K

How happy are Bear bondholders? Two weeks ago the...

2008-03-25T10:59:00.000-04:00

How happy are Bear bondholders? Two weeks ago they held paper trading for 70 cents on the dollar. One week ago, the JP Morgan Chase takeover rocketed it back to par. Then they were reported to be heavy buyers of Bear stock at $4-5 a share, so as to be able to vote FOR the deal and against the revolt of Lewis and the Bear employees. Now, voila`, their stock is worth double. Ain't America great?

Anon of 8:15 AM,Oh, and now that I look at the pos...

2008-03-25T09:49:00.000-04:00

Anon of 8:15 AM,

Oh, and now that I look at the post, the incorrect usage of "it's" came in a quote (which I assure you was cut and pasted) from Dealbreaker, which (unlike me) is a real organization with multiple writers and a large number of display ads, But no, you accuse me of paying insufficient attention, yet you didn't bother to read the post closely before criticizing me.

Anon of 8:15 AM,I do "understand" the proper usage...

2008-03-25T09:41:00.000-04:00

Anon of 8:15 AM,

I do "understand" the proper usage of its and it's.I have repeatedly told readers I am bad at typos. That is one reason I left the securities industry. They place a premium on that skill.

It is rather offensive that you decide to attack me over this. Other readers try to be helpful in pointing out typos. And if you had ever published an article, you would know that journalists and writers, unlike bloggers, have everything edited by a line editor (there is often a separate editor for content/style, which shows how specialized a skill this is). They don't have to worry about typos when they are trying to meet deadlines.

I also, and have said before, that I am not good at proofreading, A reader told me last night I had typed the date in incorrect. He didn't presume that I was unable to use a calendar.

I have in fact been tested as not being good at typos, and that was before the days of spell check (and I also know how to spell quite well), I have terrible manual dexterity and type slowly as well.

Now, do you just want me to quit posting? Most of what I write is news driven. I think it is more important to my readers to be timely than write 15% less or be considerably later by virtue of being meticulous. Or you if it bothers you that much, you can pay for a line editor.

you are right to detect a note of sympathy running...

2008-03-25T08:50:00.000-04:00

you are right to detect a note of sympathy running through the media commentary on Bear Stearns. I guess the rationale could be that the journalists feel that Bear was unfairly beaten to death (almost) by speculators and perhaps fellow institutions. Implicit in this is the belief that no big American financial institution can really fold up now. That betrays a mindset of denial about the problems.

But it seems pretty clear that JP Morgan fully und...

2008-03-25T08:15:00.000-04:00

But it seems pretty clear that JP Morgan fully understood that it’s guarantee...

Nitpicking maybe, but...

It's amazing how often you see mistaken use of it's and its, even among people who really ought to know better, and in published material that really ought to be proofread several times.

Andrew Ross Sorkin is merely doing what too many j...

2008-03-25T08:10:00.000-04:00

Andrew Ross Sorkin is merely doing what too many journalists do: echoing the meta-narrative of our times. Government is a morally bad actor. Free markets are the single answer to all problems -- even the problems created by free markets. Don't look for internal consistency in this narrative. There is none. Look instead for the meta-themes. Look for the bitch slap -- for the Fed cannot stand by and let our free market system fail but the Fed needs to take complete direction from the free market system and any deviation from taking complete direction from the free market is just one more lamentable example of government interfering with the free market.

Don't you get it?

The NYT article seems to ignore the fact that the ...

2008-03-25T04:53:00.000-04:00

The NYT article seems to ignore the fact that the discount window as 'de facto' opened to BSC via its clearing bank, JPM. But then what do you expect from the newspaper of Whitewater, Wen Ho Lee and Judith Miller?

More importantly, the FED action signals a major shift in that government bailouts now extend to bond holders. All prior 'nationalizations' (Continential Illinois, the S&Ls in the '80s and '90s) involved sending shareholder equity to 0 and reducing bond holders close to 0 while protecting all depositors.

Now, our government will bend any rule, spare no expense, to protect bond holders (and derivative counterparties) of banks and selected broker dealers.

Financial institution debt is now apparently parri passu with U. S. Treasury debt.

I find Wall St. reporting increasingly resembling ...

2008-03-25T02:51:00.000-04:00

I find Wall St. reporting increasingly resembling People Weekly or US Magazine. The most significant change in Fed policy since the Great Depression, likely to have ramifications for monetary and regulatory policy for decades hence, and all the so-called "financial" reporters are reduced to high school gossip about who got to sit at which lunch table, why Lisa told Jen about Johnny but didn't tell Rachel and OMG that was, like, so harsh!

Give me a break! Why is it that for actual analysis of the financial or economic implications of the day's news, we have to go to overseas publications like FT, while our own papers like WSJ and NYT spend their column inches on "inside gossip" and "exclusive rumors"?

To the extent that sometimes the personal side can illuminate the driving forces and motivations behind policy, it can be useful. But I suspect much of this reporting is a showing off to other reporters about who has access to what sources and how close to the "inside" you can get. Sort of like who gets invited to the cool kids' lunch table in high school.

One thing noone commented on was that it was clear...

2008-03-25T02:36:00.000-04:00

One thing noone commented on was that it was clear JPM would raise from the amount they put aside for litigation (6bn).
If a whole bear costs 250m at 2 a pop, 6b puts the price at 48, so even at 10 it's still a bargain.
Of course, money aside for litigation are soft money, but so are money paid - i.e. JPM's shares.