More thoughts on the Fed & JPM’s BSC Liquidation

Anyone get a great night sleep?

Not me. I kept waking up, mind racing, thinking about what all this means going forward.

I have Kudlow & Co. tonite, and Morning Call on Fed day, and I always like to bring some ideas that are not the usual clichéd blahblahblah. Hence, the adrenal overload.

This entire series of events has me thinking about some fascinating wrinkles:

• I think the Fed is acting appropriately to avert an entire financial system
meltdown. Whether they will be successful is as of yet, unknown. As we are so fond of saying, there will be costs: Financial,
economic, psychological, and prestige wise to this debacle.

TANSTAAFL: Speaking of which, we see the Dollar getting whacked further, Gold at $1030, and Oil over $110.

• A bailout for Wall Street may not be very palatable during a recession in a election year. Thus, we should expect a major Housing/Mortgage bailout along any day now. Cost: Very expensive.

• Could J.P. Morgan (JPM) really complete a thorough due diligence on all of Bear Stearn’s (BSC) crappy paper, leveraged risk, and counter-party obligations in 2 days? I doubt it. Hence, the $30B backstop from the Fed. Not quite free market capitalism, but definitely creative, and certainly destruction.

• JPM now gets a terrific scapegoat for the next 4 (or 8 or 12) quarters to blame for all of their crappy paper, leveraged risk, and counter-party obligations: Bear Stearns.

• The Efficient Market Hypothesis (EMH) takes yet another hit. I am beginning to think markets are lagging indicators . . .

• The impact of the credit crunch is — disturbingly — showing up in places you would never expect. Example: 20% Of Silicon Valley Startups Can’t Get To Their Cash.

• Does this mean Bear’s Quarterly earnings call — scheduled for today — will be canceled?

• EVERYTHING seems to trace its way back to Housing.

Markets are closed for Good Friday, option expiry is Thursday. Get ready for a fun filled, jam packed 4 day week!


UPDATE: March  17th, 2008

A friend IMs me, and says:

The NY Yankees paid more for A-Rod than JPM paid for Bear Stearns

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  1. Dee Leverage commented on Mar 17

    Barry…The analogy I like to use here is the Fed is 4th and 10 from their own 30 with 2 seconds on the clock. You throw a Hail Mary pass and pray for a miracle…you don’t do nothing. What is unfortunate is they can’t really let on how bad this is, so people (Joe Lewis OMG) keep trying to catch a falling knife. And this time it is the so-called smart money that is the dumbest as they are so removed from the reality that many Americans have lived way beyond their means.

    (Feel free to use my analogy on your media tour)

  2. Wells commented on Mar 17

    yes, the earnings report will not occur. This information via their website:

    Great blog.. Thanks for all your work.

  3. Peter Davis commented on Mar 17


    More interesting tidbits:

    I have a friend who was the CEO of a now-defunct California mortgage lender that went bust last summer. He told me that is was common knowledge within the industry that Lehman was holding more crappy mortgage-related paper than anyone, followed closely by Bear. Lehman’s reported troubles are not surprising.

    As for your observation that this credit crisis is spreading to non-financials, the proposed new professional football league, the AAFL, canceled its first season because it could not obtain financing at anything approaching reasonable rates.

    Also, my hometown Patriots recently were stuck paying about 15% on their debt because one of their bond auctions failed. They eventually figured out a way to restructure this debt, but the Patriots are a solvent, extremely profitable organization. If they’re having trouble with financing, that does not bode well.

  4. Dee Leverage commented on Mar 17

    In a similar vein, I ran into a former top analyst at Bear Saturday night…he said he still had some options (stock closed at $30 remember) and was a little bummed. Told me a former “Bear alumni” called him during last week and told him he was buying Bear at 50.

    This should be a reminder of how much WS wealth is tied to stock and particularly options, which the way they are leveraged to strike price go from worth millions to nothing rather suddenly. That is the unspoken fallout here.

  5. Dee Leverage commented on Mar 17

    Understatement of All-time by CNBC’s Leisman:

    “If the Fed hadn’t acted last night, we would have really had a serious problem.”

    Stevo: This IS pretty serious.

  6. Steelduck commented on Mar 17

    11:37AM (GMT)
    LEH is down 30% in pre-trade.
    YEN is up 2.7% vs. the USD.

    There appears to be massive closing of YEN/USD carry-trade positions.

    It does not look like the fed can do much at this point.

  7. SINGER commented on Mar 17

    Reverse Head and Shoulders breakout on the long term Euro/USD chart measures to a $1.88/Euro target… If that happens, what will everything else look like?

  8. Neal commented on Mar 17

    So, what financial will not take a big hit today? It seem quite likely that an efficient market will knock some to low single digits-after all–how different are they than BSC?

    After all–it was only one week from “no problem” to collapse for BSC.

  9. John T commented on Mar 17

    If the fed is backing up 30B in bad paper doesn’t that mean that the Fed is paying Chase over 29B to take over Bear?

  10. Bob_in_MA commented on Mar 17

    Don’t forget moral hazard. BSC shareholders certainly did not get bailed out. Everyone says they were the poster child for risky lending and securitization. Well, now they’re also the poster child for shareholder losses.

    A lot of idiots thinking they were bottom fishing over the last eight weeks are about to get a little surprise.

  11. sam commented on Mar 17

    My shorts: (like Whitney’s call)

    intitiate sell ratings:
    bombay sensex

    piece of mind

  12. Dee Leverage commented on Mar 17


    If larry gets on your case at all (he might be going insane, who knows) remind him he said in Sept. after the first rate cut that the dollar would strenghten because of it.

  13. njdoc commented on Mar 17

    A bailout of housing is an economically untenable position for this country. We don’t have the money to pay for our current budget, and with the economy slowing and tax receipts diminishing, a huge housing entitlement program could only be accomplished by inflation and taxation. It would be a ruinous path for us to take. But of course, political expedience makes for strange bedfellows.
    Which brings me back to back to a quote by Lenin, “we will destroy the bourgousie by grinding them between the millstone of inflation and taxation”.

  14. SPECTRE of Deflation commented on Mar 17

    Fire sale! Unfrigging real. I was busy all weekend, and I didn’t find out about the latest debacle till momments ago. This is how you screw shareholders. The Masters of The Universe are clueless, and in fact, they are the Apple Dumpling Gang.

  15. RNL commented on Mar 17

    Why sell Euro/Gold/Oil with another rate cut coming? Why not wait for the next hit of Helicopter Ben heroin?

  16. Kuds commented on Mar 17

    They tried the bailout for homeowners first. It turned out it was mostly symbolic. But it was designed to pave the way for the bailout of Wall Street. Since the Fed or some other gov entity will have have to end up owning the toxic paper, yes I agree that they will try another homeowner bailout with some teeth to it. It’s election year after all.

  17. Dee Leverage commented on Mar 17

    Could this be The Saint Patrick’s Day Massacre??? Shame I can’t trademark a short catch prase.

  18. JustinTheSkeptic commented on Mar 17

    Why does CNBC feel that they have to always make the “Bull Case?” Who signs their pay-checks? Hmmmmm?

  19. SPECTRE of Deflation commented on Mar 17

    Am I reading this right? $2 per share? Someone should really go to jail on this BS (pun intended).

  20. wally commented on Mar 17

    No, it is not a bailout. Remember, the extent of Morgan’s exposure is unknown… they are, in reality, paying a LOT more than $2 for their fun.
    The quarter-point is mostly symbolic and, personally, I hope it stops there. The rate cuts are doing no good and a lot of harm. The problem isn’t rates and lower rates are not doing their traditional job of propping up banks because lower rates have no effect if there is no lending.

  21. Strasser commented on Mar 17

    So that’s what they all meant by “contained”!! Just cannot imagine what else the Fed knows, and is yet to hit the fan.

  22. Chief Tomahawk commented on Mar 17

    Oh Kudlow and Co. should be interesting. Larry only recently got onboard for defending the dollar.

    Now BSC, two trading days ago in the $60s, sells for $2!!!!

    That’s a frontal labotomy for Goldilocks!!!!!

  23. gunthestops commented on Mar 17

    Remember–it’s only money and stocks can’t go lower then zero—lol

  24. jpl commented on Mar 17

    Does anyone know what the CEO of Bear Sterns will receive? Had they gone belly up would he would probably loose his Golden Parachute.

  25. Al Greenspan commented on Mar 17

    I think Cinefoz, in reality a masked superhero trader for Bear Sterns, is this morning looking for work at McDonalds….

  26. Strasser commented on Mar 17

    Fitch says they are removing Bear from the negative watch list!

  27. Michael M commented on Mar 17

    To misquote Seinfeld: “Hello Llllehman!”

  28. JonatsGonats commented on Mar 17

    With how the premarket is moving right now do not be surprised if a rally is staged later during the day as the big funds would squeeze out the shorts to get money from them. And maybe, just maybe, we are nearing market capitulation already and that would be a nice thing to finally have.

    Come visit too… :)

  29. JustinTheSkeptic commented on Mar 17

    Our President is going to speak again today to put some light on these issues. That makes me confident, how about you? What did he do in his MBA classes? My guess is probably perfected the spit-ball shooter. Mr. President, NO THANKS, you and your party have done enough. [Full Discloser, I’m and independent]

  30. Marcus Aurelius commented on Mar 17

    This is where we get to see the awesome brain power demonstrated by the holder of an MBA from Harvard.

    It’s a degree from Harvard, for god’s sake. It has to be worth something.

  31. andy commented on Mar 17

    5,612,922 reported bear shares for cayne, does that mean he gets 11 and a 1/4 million for his shares that would have been lost in BK?

    there’s your parachute for a few of em.

  32. Vermont Trader commented on Mar 17

    BR – I have never believed that stocks discount the future. I’ve always felt that in recoveries they have one of their frequent rallies to a trading range high and then some good news comes along and the rally just continues.

    Fooled by randomness so to speak.

    The best stock advice I was ever given and it has saved my ass so many times is that in the end it is just a confidence game.

    You need to look at your holdings every day and ask whether confidence in the company is rising or falling. Without rising confidence there are no rising prices.

  33. SPECTRE of Deflation commented on Mar 17

    MA, I agree with you, but to single out El Presidente’ when Congress has oversight on all this shit is ridiculous. As I have said many times, and will continue to say, the elites from both Juntas are raping and pillaging us blind.

  34. kk commented on Mar 17

    1990 vs. 2007-08, so many similarities.

  35. Ross commented on Mar 17

    Although I dislike making money on the misfortunes of others, in this case I’ll make an exception.

    Is Bill Miller still up for portfolio manager of the century?

  36. blin commented on Mar 17

    Good one Michael…lol

    We could see the domino effect this week since LEH, GS, MS are all reporting earnings.

  37. Anthony commented on Mar 17

    I am wondering if the Fed’s encouragement of the JPM/BSC deal at this level, with the ensuing loss of capital, wealth, and whatever else for all of those involved is its way of exemplyfying this whole ordeal for the world to see. Imagine a parallel universe in which Unky Hank, pipe in tow, has a fireside chat with his plebians and lets us all know that not only are common folks losing money (depreciating house prices) but those on wall Street that took the risks are losing (and losing big) as well. Just a thought!

  38. Marcus Aurelius commented on Mar 17

    Posted by: SPECTRE of Deflation | Mar 17, 2008 8:49:54 AM


    Hey, SPEC:

    I agree that Congress had done a horrible job.

    I believe that the difference between the two parties is fecklessness and lack of backbone vs. criminality and cronyism. I’ll leave the assignation of those attributes to you.

    Good luck, today.

  39. Alan Greenspan commented on Mar 17

    Well, I was checking on some short term (3 month) cd’s I bought over the weekend, and the trade hasn’t gone through…so I called the bond desk at Schwab, and I can’t get through….they must be swamped….

  40. bifman commented on Mar 17

    Hey Barry, enjoy reading your site.

    Reading around the web a couple people are asking what’s to stop Bear shareholders from not endorsing the deal, once things calm down and we have a market/valuations for their assets. Assuming that is, that this is more of a liquidity thing than an asset quality thing. What do you think?

  41. SPECTRE of Deflation commented on Mar 17

    Every frigging morning they drag out clueless wonders on CNBS, save Barry who speaks the truth for those that will listen.
    I guess we are supposed to have confidence in anything they say? Bear is worth 1% of it’s worth 16 days ago. Are you f##king kidding me?

  42. SPECTRE of Deflation commented on Mar 17

    MA, to you as well because we will need it. They are both killing J6P, but I will leave it to you and yours to make it right. Should be fun watching the roaches making sure they are covered if not J6P.

    What we need is to be Americans. Not Republicans. Not Democrats. AMERICANS. To demand something more from our shared governance in Washington regardless of Party.

  43. JS commented on Mar 17

    Nice summary. I slept fine… on a pillow of puts.

  44. Byno commented on Mar 17

    For perspective, at it’s worst, the Japanese banking industry had only ~Y 30T in bad debts in the late 90’s. We’ve already got many multiples of that, and my suspicion is that we’re closer to the end than the beginning.

  45. Michael M commented on Mar 17

    In my book, the Federal Reshuffle must be thinking that they now have to do at least 100 bps tomorrow or today to at least try to avoid a meltdown. But at this point I don’t really think it makes sense to save some powder for later. If they believe rate cuts still have power then why not go nuclear and cut to 1.5% or 1% in one big move that could change psychology. The reality is that it makes little difference in the real economy whether the fed funds rate is 1.50% or 2.00%, it’s super low negative real rate vs ultra low negative real interest rate. It would send the signal that the Fed is desperate (but we know that), but it also signals that the Fed will do whatever it takes. Meantime Treasury could support the dollar together with BOJ and ECB or ECB cut could as well.

    “Crazier things have happened”, I heard a two-dollar boo say.

  46. Eric commented on Mar 17

    Here’s Nouriel Roubini from four months ago (Christmas to be exact):

    To mitigate the effects of a US recession and global economic slump, the Fed and other central banks should be cutting rates much more aggressively, rather than relying on modest liquidity injections that are bound to fail. The Fed’s 25-basis-point cut in December was puny relative to what is needed; similar cuts by the Bank of England and Bank of Canada do not even begin to address the increase in nominal and real borrowing rates that the sharp rise in Libor rates has induced. Central banks should have announced a coordinated 50 basis-point reduction to signal their seriousness about avoiding a global hard landing.

    Likewise, the European Central Bank’s decision not to cut rates – deluding itself that it may be able to raise them once the allegedly “temporary” credit crunch is gone – is mistaken. With deflating housing bubbles, high oil prices, and a strong euro already impeding growth, the ECB is virtually ensuring a sharp euro-zone slowdown.

    In any case, the actions recently announced by the Fed and other central banks are misdirected. Today’s financial markets are dominated by non-bank institutions – investment banks, money market funds, hedge funds, mortgage lenders that do not accept deposits, so-called “structured investment vehicles,” and even states and local government investment funds – that have no direct or indirect access to the liquidity support of central banks. All these non-bank institutions are now potentially at risk of a liquidity run.

    Indeed, US legislation strictly forbids the Fed from lending to non-depository institutions, except in emergencies. But this implies a complex and cumbersome approval process and the provision of high-quality collateral. And never in its history has the Fed lent to non-depository institutions.

    So the risk of something equivalent to a bank run for non-bank financial institutions, owing to their short-term liabilities and longer-term and illiquid assets, is rising – as recent runs on some banks (Northern Rock), money market funds, state investment funds, distressed hedge funds suggests. There is little chance that banks will re-lend to these non-banks the funds they borrowed from central banks, given these banks’ own severe liquidity problems and mistrust of non-bank counterparties.

    Major policy, regulatory, and supervisory reforms will be required to clean up the current mess and create a sounder global financial system. Monetary policy alone cannot resolve the consequences of inaction by regulators and supervisors amid the credit excesses of the last few years. So a US hard landing and global slowdown is unavoidable. Much greater and more rapid reduction of official interest rates may at best affect how long and protracted the downturn will be.

    Hate to gush, but this man is a prophet.

  47. SPECTRE of Deflation commented on Mar 17

    Barry, this is just for you because of your love for music:

    “Call It Stormy Monday (But Tuesday Is Just As Bad)”, also known as “Call It Stormy Monday”, or just “Stormy Monday”, is a blues song written by T-Bone Walker and first recorded in 1947. Confusingly, it is also sometimes referred to as “Stormy Monday Blues”, although that is actually the title of a different song, a #1 R&B hit recorded in 1942 by Earl Hines and Billy Eckstine; Walker titled his song as he did to avoid the name collision.

    The original recording appeared on Black & White Records, produced by Ralph Bass, and was one of Walker’s breakthrough sides in pioneering the idiom of electric blues guitar. This recording also featured smoky trumpet work from sideman Teddy Buckner. It reached #5 on the R&B charts in 1948. B.B. King has said that “Call It Stormy Monday” inspired him to begin playing electric guitar.

    Walker re-recorded the song with better fidelity and a somewhat different arrangement on his classic 1959 Atlantic Records album T-Bone Blues.

    The song became a standard for blues and blues rock artists, and over the years was recorded by Albert King, Eva Cassidy, Question Mark and the Mysterians, Jethro Tull, and others. Trouble ensued when artists named it “Stormy Monday Blues”, however, as for instance Bobby Bland did on a well-known rendition, as it was mis-credited and royalties went to the Hines-Eckstine song rather than Walker’s. This may have also happened on some of the treatments that were just called “Stormy Monday”.

    The song was most popularized by The Allman Brothers Band, who included a sterling live performance (as “Stormy Monday”) on their classic album At Fillmore East in 1971. It garnered considerable airplay on progressive rock and album-oriented rock radio formats during the 1970s.

    The 1988 Mike Figgis film Stormy Monday was named for the song, and includes B. B. King’s performance of it over the opening credits.

  48. Dee Leverage commented on Mar 17

    With how the premarket is moving right now do not be surprised if a rally is staged later during the day as the big funds would squeeze out the shorts to get money from them.

    The problem is, especially for Nasdaq, short inteerst is absurdly low. See my link and use pull down symbols for major QQQQ stocks. The only squeezing here will be long’s caljunes.

    QQQQ Short Interest

  49. Marcus Aurelius commented on Mar 17


    Agreed on everything. Time to defend the Constitution. I can’t emphasize how serious I am about that.

  50. nemo commented on Mar 17

    Listen, BSC went down in large part because of rumors, causing a run by creditors and clients… $ 17 billion! They went down (maybe early, maybe not) because of RUMORS. That means that others are also vulnerable here, to the same thing.

  51. Vermont Trader commented on Mar 17

    I am about to say the craziest thing I have said on this blog.

    I actually think the big money center banks are a buy today. Call it a flight to quality or whatever. Call it the endgame.

    Where are all the BSC accounts going? Who can borrow all they want from the Fed, cheaply?

  52. Estragon commented on Mar 17

    A truly frightening thought… what if JPM saw that if they didn’t buy BSC, things could cascade and open their derivative book to material counterparty risk?

  53. SPECTRE of Deflation commented on Mar 17

    MA, I’m right there with you. We stand on solid granite as our foundation with the Constitution. The Constitution Party sounds about right to me. Ron Paul needs to tell the Republicans to go to Hell and start a third party run. It’s times like these that bring about real change in a corrupted system. For the sake of our children and grandchildren I pray that people see the light before it’s too late.

  54. John Borchers commented on Mar 17

    It means the Fed is useless. The gov’t can not stop a depression from occuring and that’s exactly what’s going to happen.

    I’m buying shares with huge spreads going forward.

    Cash only boys and girls. And don’t buy credit swap stuff! No No to SSO, SDS, TWM, UWM EEV etc etc.

    You don’t know what bank owes the credit swap.!

  55. Maximo commented on Mar 17

    MBA from Harvard = Efficient Market Hypothesis

  56. njdoc commented on Mar 17

    Jim Rogers stated on Bloomberg that Bear paid Billions in bonuses in January, and BK proceedings would have forced the recipients to give back the money.

  57. Marcus Aurelius commented on Mar 17

    MBA from Harvard = Daddy had the money. Nothing more.

  58. Marcus Aurelius commented on Mar 17

    Jim Rogers stated on Bloomberg that Bear paid Billions in bonuses in January, and BK proceedings would have forced the recipients to give back the money.

    Posted by: njdoc | Mar 17, 2008 9:39:18 AM


    This is a law enforcement issue now. The Fed needs to concentrate on money supply. Where are FBI/DOJ? They are co-conspirators.

  59. Michele commented on Mar 17


    Excellent point, markets ARE LAGGING indicators!!!

  60. Dee Leverage commented on Mar 17

    A truly frightening thought… what if JPM saw that if they didn’t buy BSC, things could cascade and open their derivative book to material counterparty risk?

    I think you nailed it Estragon…all these institutions that lent eachother money and have derviatives trades on can’t really let the other fail, as their own books would get marked to market, ie. close to ZERO.

  61. TempusFugit commented on Mar 17

    “So, what financial will not take a big hit today? It seem quite likely that an efficient market will knock some to low single digits-after all–how different are they than BSC?”

    JPM up 5% as of 9:52 edt

  62. SPECTRE of Deflation commented on Mar 17

    The theives must go to jail on this nonsense. Where the Hell is the SEC on this debacle? It’s the little guy who is getting killed on this bullshit, and I get to hear how the banks are strong by El Presidente’. Are you f##king kidding me? They are so strong that we are using steps not seen since the Depression? GD greedy assbites!!!!!!!!!!!!!!!!!!!!!!

  63. Joe Klein’s conscience commented on Mar 17

    Can anyone tell me why Bear is trading at $3.50(appox.)? Is that normal considering what we know?

  64. TempusFugit commented on Mar 17

    “The Efficient Market Hypothesis (EMH) takes yet another hit. I am beginning to think markets are lagging indicators . . .”

    Oh, ye of little faith! The EMH comes in three flavors: weak (efficient with respect to technical analysis); semi-strong (in addition, efficient with respect to fundamental analysis); and, strong, (efficient with respect to all information). No one, not even the profs at the U of C who invented it believe the strong EMH. I.e., yes you can make money trading on insider info…if you don’t go to jail.

    Anyway, the EMH in its two weaker flavors is still doing just fine. Remember, EMH does not equal “the market is smart” it only means that the market is smarter than you.

  65. Dee Leverage commented on Mar 17

    The trader in me says, as soon as JPM starts tanking in a few minutes, Dow is toast. they are trying to put lipstick on a pig.

  66. Ben commented on Mar 17

    Short covering or real buying occurred? What a recovery! Cheers!

  67. Innocent Bystander commented on Mar 17

    Vermont Trader, I began thinking that last night too. I put that notion aside, as we don’t know very much about the condition of the banks. How much crap does Lehman have on its books? Or anyone else? There is money to be made, but it might not be for months/years.

  68. TempusFugit commented on Mar 17

    “The trader in me says, as soon as JPM starts tanking in a few minutes, Dow is toast. they are trying to put lipstick on a pig.”

    Why would JPM tank? Jamie is sitting on a HUGE pile of Bernanke puts.

  69. wunsacon commented on Mar 17

    >> I’m buying shares with huge spreads going forward.
    >> Cash only boys and girls. And don’t buy credit swap stuff! No No to SSO, SDS, TWM, UWM EEV etc etc.
    >> You don’t know what bank owes the credit swap.!
    >> Posted by: John Borchers | Mar 17, 2008 9:30:43 AM

    John, what do you mean by “shares with huge spreads”? The only thing I can think of to replace SDS, QID, SRS, etc. is buying puts. Is that any safer? Is that what you’re doing?

  70. Peter Boockvar commented on Mar 17

    While the JPM-BSC deal puts out a major fire and for the sake of the financial system we should all breathe a sigh of temporary relief (w/o getting into the issues of the Fed’s involvement and moral hazard debate), it puts a new lower valuation on the equity of financial firms and adds concerns that many more fires will need to be put out. LEH is the new fear after a story that DBS Group doesn’t want its traders to make new transactions with them. LEH has come out and said they traded today and Moody’s affirmed LEHs credit rating. Primary dealers now have access to the Fed’s discount window at only a 25 bps penalty above the fed funds and this will add to their access to liquidity. The ff futures are pricing in a 100% chance of a 100bps cut tomorrow and the $ index is down sharply for a 4th day in response.

  71. dan in michigan commented on Mar 17

    As someone who has apparently survived a near death experience as a client of Bear prime brokerage, let me ask a question. Is everyone who prime brokers at Morgan and Goldman a 100% confident that nothing bad can happen? Really? I think there could be a huge move to PB’s with big balance sheets. As an aside, John Mack has accomplished a feat that no other man has done. He has wrecked the same company twice.

  72. Lee commented on Mar 17

    What is disturbing is that the bailout was prearranged with JP Morgan. Why did Bear immediately call JP Morgan when it got in trouble, rather than notify all the major banks? Why was JP Morgan so quick to say yes? That’s not a rational market at work and leads me to believe JP Morgan did it because it was scared to death of a Bear meltdown. JP Morgan is simply trying to buy time which makes me believe it could be next.

  73. JustinTheSkeptic commented on Mar 17

    What would stop the government from forming, through the secret service, etc., to come in support equity markets in situations like these? Or are the markets not plunging because there are so many big funds that really control everything and will not sell, because “damage control models,” suggest otherwise. So, what does big business, government do – it tells the uninformed investor that nothing is wrong and this is a bottom. Only when the little guys start dumping, will they do the same, because at that point their “damage control” models kick in more negative numbers. (Just a thought here?). Please tell me if I’m way off base here?

  74. LFC commented on Mar 17

    Where the Hell is the SEC on this debacle?

    Bush neutered them almost as soon as he got into office.

    Name one regulatory agency under Bush that’s improved it’s performance in actually, you know, protecting Americans. To quote an episode of Two and a Half Men, every one of them is now “smooth as a Ken doll”.

  75. Aurora Borealis commented on Mar 17

    The Bear Stearns case means that the Bank expects Bigger Corpses and more Vultures. More and more Junk will be thrown to the Bank.

    Soon the government and the FED will administer the Junk Bank owned by the people of the USA.

  76. Ritchie commented on Mar 17

    Vermont Trader: “Without rising confidence there are no rising prices.”

    Vermont Trader say hello to manipulation, deception, deceit, con artistry, etc…

  77. toady commented on Mar 17

    Time to buy used ferraris with NY plates, Hampton beach homes, and Manhatten condos. The BSC folks have had a personal finance margin call that will require liquidity.

    Not that I could ever hope to have enough $$ to ever be a buyer of any of those things.

  78. SPECTRE of Deflation commented on Mar 17

    Ben, you see what I meant on Friday? Things needed to be worked out in order for JPM to steal the BSC Shareholders equity blind.

  79. SPECTRE of Deflation commented on Mar 17

    LFC, you fail to see to systemic corruption by all concerned. Congress has oversight of these things. It was the Congress who did away with the Glass Steagall Act in 1999. Here’s a little refresher for you. They are all corrupt, but please continue to live in your polyanna world.

    What Was The Glass-Steagall Act?
    by Reem Heakal

    In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as the Glass-Steagall Act (GSA). This act separated investment and commercial banking activities. At the time, “improper banking activity”, or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors’ money. Additional and sometimes non-related explanations for the Great Depression evolved over the years, and many questioned whether the GSA hindered the establishment of financial services firms that can equally compete against each other. We will take a look at why the GSA was established and what led up to its final repeal in 1999.

    Reasons for the Act – Commercial Speculation
    Commercial banks were accused of being too speculative in the pre-Depression era, not only because they were investing their assets but also because they were buying new issues for resale to the public. Thus, banks became greedy, taking on huge risks in the hope of even bigger rewards. Banking itself became sloppy and objectives became blurred. Unsound loans were issued to companies in which the bank had invested, and clients would be encouraged to invest in those same stocks.

    Effects of the Act – Creating Barriers
    Senator Carter Glass, a former Treasury secretary and the founder of the U.S. Federal Reserve System, was the primary force behind the GSA. Henry Bascom Steagall was a House of Representatives member and chairman of the House Banking and Currency Committee. Steagall agreed to support the act with Glass after an amendment was added permitting bank deposit insurance (this was the first time it was allowed).

    As a collective reaction to one of the worst financial crises at the time, the GSA set up a regulatory firewall between commercial and investment bank activities, both of which were curbed and controlled. Banks were given a year to decide on whether they would specialize in commercial or in investment banking. Only 10% of commercial banks’ total income could stem from securities; however an exception allowed commercial banks to underwrite government-issued bonds. Financial giants at the time such as JP Morgan and Company, which were seen as part of the problem, were directly targeted and forced to cut their services and, hence, a main source of their income. By creating this barrier, the GSA was aiming to prevent the banks’ use of deposits in the case of a failed underwriting job.

    The GSA, however, was considered harsh by most in the financial community, and it was reported that even Glass himself moved to repeal the GSA shortly after it was passed, claiming it was an overreaction to the crisis.

  80. RB commented on Mar 17

    why is bear trading at over $2. does the market expect another buyer to step in?

  81. curmudgeonly troll commented on Mar 17

    What’s the point in selling, if it won’t buy you a latte.

    (short-covering might have something to do with it…but maybe someone’s trying to accumulate enough to block it and hold out for at least a couple of billion, once Jamie has his heart set on Jimmy’s office and private elevator)

  82. Easton Richmond commented on Mar 18

    Hi All –

    I work with a law firm that is investigating Bear Stearns, and whether the company protected employees’ interests during the recent stock collapse. Many Bear Stearns employees saw their retirement accounts decimated by recent events, and some are questioning whether Bear Stearns acted appropriately.

    Specifically the firm is looking into whether Bear Stearns lived up to its fiduciary duty to employees who held Bear Stearns stock as part of the company’s pension plan.

    If you are a Bear Stearns employee and are concerned that the company’s actions hurt you or your pension plan, you may want to contact Hagens Berman Sobol Shapiro ( or to learn more about the investigation or call the firm at 206-623-7292.

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