From Bloomberg:
Bear Stearns Cos. Chairman James “Jimmy” Cayne sold his shares in the firm prior to a shareholder vote on the company’s pending takeover by JPMorgan Chase & Co.
Cayne sold 5.6 million shares at $10.84 a piece on March 25 on the New York Stock Exchange, according to a regulatory filing today. Bear Stearns spokesman Russell Sherman had no comment on why or to whom Cayne sold his shares.
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So *everything* the board knows about Bear Stearns is public information?
Otherwise, how is this not insider trading?
He should have hired one of his own bankers and done a private with bond holders out of the box – he may have gotten $20
Sixty million… naw, no one was bailed out. This administration’s free market credentials remain pure.
I have a question and would appreciate any thoughts:
Why did JPM decline to purchase the $30 billion in assets? It appears that the price for Bear would have been the same regardless. So why not take the extra $30 billion given it would have been additional incremental value whatever the worth?
There must have been associated liabilites I assume.
Regardless, I find it odd that the “assets” that ended up in the fed’s (us taxpaxpayer’s) pockets have never been described anywhere as far as I know. If they are in fact “assets” why does the US Taxpayer mind if the fed did not pay anything for these assets.
Am I missing something here?
Tim,
The reason is that the assets are worth a small fraction of their carrying value. The Fed didn’t want them written down as part of the deal, because that would reveal that many other institutions holding Level 3 sludge are in fact insolvent. Officials are desperately trying to prevent price discovery on mark-to-make-believe books; otherwise the jig is up. If JPM took those assets at x on the dollar, auditors of other firms would have no cover.
This concludes the Bear Stearns chapter of the 2008 schadenfreude orgy. Stay tuned for the next installment, you’re all invited.
Egads. My heart bleeds for him. How can someone of his stature be expected to survive on only $60 million? The houses, the cars, the boats, the staff, the quality food are all so expensive these days. I sure hope he has other assets to draw on! :)
Jimmy Cayne should be made to take that 61 million and give it to the employees. After all, it was under his watch that this whole fiasco took place.
I’m still far from sure that BSC was deeply insolvent at the time the Fed sold it to JPM. Clearly, Bear was massively illiquid on Friday, 14 Mar, and the difference between still being massively illiquid on Monday, 17 Mar and being massively insolvent on Tuesday, 18 Mar is, oh, 24 hours more or less. Do I have any sympathy for BSC’s stakeholders? Zero: There is virtually no likelihood that that concern was going to be going still by the end of this year given what they are exposed to and how much on their book. If this pinch didn’t get ’em the next one would. And they will soon have major company.
What bothers me far more, still, is whether, or rather how much, JPM jobbed the Fed on the steal. A whole bunch is my feeling, but we will likely not know for years, if ever. The issue for the Fed, and really for all of us, isn’t whether BSC was a house afire but rather that the oil refinery of derivatives which they’ve built up on their lot would blow if the FIRE Brigade didn’t spring into action. Whether the Fed had to stand patsy or not it still had to stand for the price to avoid a potential Derivatives Event, which as I’ve posted on before was cheap at $30 B to avoid.
The Fed didn’t put up that money as a credit line—that’s what it is in effect, not upfront dough but a credit line against losses current or future—because that is necessarily the size of the current hole in Bear’s book; that assumption is a logical fallacy since the money doesn’t go to Bear. This $30 B may or may not be needed to fill Bear’s hole, but it assuredly what JPM needed to do the deal. Obviously, JPM wanted a high firewall against _future_ losses, this is the real question for Bear’s book going forward, how much MORE will they lose. So I doubt that Bear is presently down even a third of that, or else JPM didn’t get themselves a very high wall, no?
Just my speculation. Along that line, though, for a hoot I put together a fly-on-the-wall scenario on the Bear-end operation. I’m post it separately in the following post for a little entertainment in these grave times. : ) >>>>>>
In a New York Hour:
A Tragicomedy for Three Voices
Metropolis, 1630 hrs EST, 14 Mar 08
*ring-ring*
Dimon: “Talk to me.”
Schwartz: “I can’t close my book, Jamie. I’m a billion down, and anything that’s not liquifying on a slab is out for collateral.”
Dimon: “And the SECs are on Line One, and Bermuda on Line Two, that’s why you’re calling on your cell?”
Schwartz: “Let’s just say I’m not in the washroom to use the facilities. What can I do to get you to back our trades so we clear into the weekend?”
Dimon: “Hm. Fax me a note for your headquarters, and we’ll stand for nine digits. What happens when you open on Monday?”
Schwartz: [The pause heard round the world] “We may need another billion.”
Dimon: “Hmm. I’ll have to make some some phone calls on that. I’d like you to think about whether you’ll sell the shop if I can’t line up the gigabuck.”
Schwartz: [The sussuration of hair falling out floorward] “I’ll talk to my guys about it.”
*dialtone*
*ring-ring*
Geithner: “How may I be of service?”
Dimon: “Timmie! I just cleared Bear’s trades. They’re one very large underwater with my lot holding the tab. If they open on Monday, they’re BK, and the derivates market goes nuclear. That’s nu-klee-ur, as in kiss your ass goodbye.”
Geithner: “Dash it all.”
Dimon: “Now don’t get in a twist over it. I’m gonna buy ‘em up, and we’re tall in the saddle over here. And the boys on my desk know how to run all their deals, so be sure we won’t let any balls drop on this one. But I’m gonna need your help here, Timmie, just like, y’know, you do it over in Commercialville.”
Geithner: “That’s mighty white of you, Mr. Dimon. But our involvement, now; that would be . . . highly irregular. How do you even known that they may be insolvent on Monday?”
Dimon: “I’m holding their promissory for 383 Madison Avenue against the positions we just cleared. What does that tell you?
Geithner: “The only thing Al’s wearing are cement galoshes.”
Dimon: “While sucking blue sky through a straw. Now look: I don’t know how far they’re down, but I’m sure Morgan can handle it or we wouldn’t be talking. Anything they can do, we can do better, and sure as Hell do bigger. But I’ve got to have you backstop this if I’m going to sell it to my Board. Sooo, what it’s going to take is a line of credit against Bear’s book, valued as of last Monday, no recourse to us, for, say, thirty gigabucks. Now, before you get a cramp in your sphincter, keep in mind this is a ‘for show’ number. If they were under for one third of that they’d already be so gone we wouldn’t remember their name. And you guys can hold their mortgage paper max long, so you’ll finish in the money even so; I mean, we all know it’s coming back in a few years, right? But we know their positions are big and are down as of today so we need your line of credit for protection if we’re going to do it.”
Geithner: “It would look like heck if I give you a nickel and not the other players.”
Dimon: “So open the auction’s to all of us. ‘For show.’ Look already, we all know you’re going to do it by the end of the month, so just push it up. This things gonna rattle the china, so that wouldn’t be a bad idea anyway. ‘Pay us now, or pays us later’—I’m joking, Timmie.”
Geithner: “I seriously doubt I can get thirty very large past the higher pay grades. Can we just go with the ‘stands ready’ boilerplate?”
Dimon: “I need it in ink, Timmie. By Monday. In fact, by Sunday if I’m going to have time to sign with the bozos.”
Geithner: “The pols will murder us unless Bear is really broke.”
Dimon: “Those mooks at Bear can’t trade if they don’t trade with us, and if they can’t trade they’re dead. So they’re dead to me. I’m not going to pay more for them upfront than tuppence to put over their eyes. I can get their talent with private packages, but that’s my business. That’ll read as ‘broke’ for the Beltway bloviators. Listen, you don’t want to push the wheel on this, fine, we can walk. We’re covered. But why don’t you buzz up Hank and the Perfesser and ask them what their plan is for the morning after six terabucks in derivatives in play on the shadow.net give or take get pissed out through the hole in the number ‘zero,’ never to come back.”
Geithner: “Now don’t be like that, Jamie; you’re talking, I’m listening.”
Dimon: “Would you rather just hand thirty billion to Bear Clowns straight across, and have their boys wire it down to the Caymans to short the dollar?”
Geithner: “Fuck ‘em anyway.”
Dimon: “Fuck ‘em anyway. I’ll talk to my guys.”
Geithner: “I’ll talk to my guys. Stay close.”
Dimon: “Like a tattoo, Timmie.”
*click*
*click*
*beep-beep*
Schwartz: “Jamie, what’s the play?”
Geithner: “I’ve got a problem: you’ve got a problem. I’ve got a solution. You get my solution.”
Metropolis, 1645 hrs EST, 14 Mar 08
Ha Richard, that was great! I see the makings of a screenplay here…
I had a laugh riot with that, but somebody else can do the movie. I just wonder how much of it, if any, is true. _I_ can laugh, I guess ’cause my net assets are above the neck rather than in the bank . . . .
That’s great writing Richard! You’re not kidding about those assets of yours.