Two Dollars/share, or an “Orderly Liquidation” ?

You call this a rescue?

Bear Stearns Cos. reached an agreement to sell itself to J.P. Morgan Chase & Co., as worries grew that failing to find a buyer for the beleaguered investment bank could cause the crisis of confidence gripping Wall Street to worsen.

The deal calls for J.P. Morgan to pay $2 a share in a stock-swap transaction, with J.P. Morgan Chase exchanging 0.05473 share of its common stock for each Bear Stearns share. Both companies’ boards have approved the transaction, which values Bear Stearns at just $236 million based on the number of shares outstanding as of Feb. 16. At Friday’s close, Bear Stearns’s stock-market value was about $3.54 billion. It finished at $30 a share in 4 p.m. New York Stock Exchange composite trading Friday.

This was not a bailout of any sort.

What the NY Fed did was allow for an orderly liquidation. The Fed is providing the liquidity for JPM’s Bear unwind, guaranteeing a good chunk of the debt:

"The central bank also approved the financing of JPMorgan Chase & Co.’s purchase of Bear Stearns Cos., including support for as much as $30 billion of Bear’s assets."

What does THAT mean? "Support for as much as $30 billion of Bear’s assets."  Who is buying this — the Fed, or JPM ?

Truly, an amazing development.


This whole affair raises many more questions than it answers:

• What sort of due diligence did British billionaire Joseph Lewis do prior to picking up 6% of Bear?

• The Fed cut 25 bps at the Discount Window Sunday night — what is THAT gonna do?

• Goldman Sachs Group will announce asset writedowns of about $3 billion this week — what else is out there in terms of iBank write downs?

Nikkei off 3.6% in early trading; Dow Futures off 240, S&P 500 down -32.70, NASDAQ down -38.25

• Of all the firms most similar to Bear Stearns, one name keeps coming: Lehman Bros (LEH)

What more will we learn tomorrow?

U.S. Fed Cuts Discount Rate, Says Dealers May Borrow   
Scott Lanman   
Bloomberg, March 16 2008

A Stake Through the Heart   
Bear’s Biggest Holders May Have Little Choice But to Cut Their Losses
WSJ, March 17, 2008

J.P. Morgan Rescues Bear Stearns
U.S. Pushed Deal To Avert Crisis; A Fire-Sale Price
WSJ March 17, 2008

Goldman Sachs to reveal $3bn hit
By Mark Kleinman and Louise Armitstead
Telegraph, 12:07am GMT 16/03/2008

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What's been said:

Discussions found on the web:
  1. RW commented on Mar 16

    Absolutely stunning, current stock holders including a lot of BSC employees virtually wiped out… things at BSC must have been far worse than we imagined; but then that could be said about a lot of things the past 8 years.

  2. bc123a commented on Mar 16

    Any lottery jackpot pales in comparison to those who bought $75 march puts two or three weeks ago. Hell, even in comparison to those who bought $50 puts this very monday.

  3. JBA commented on Mar 16

    It’s no different than an old fashioned shut down of a failed S&L. The Gov comes in, shuts it down, finds somebody to take over. Gov eats the losses ($30 bn) in this case. Management and shareholders are effectively wiped out. Nothing to see here just move along

  4. The Mongbat commented on Mar 16

    Well, this should be fun for the Lehman Preferreds I picked up a couple months ago… Why do I even try to catch falling knives?

    Question: this should help the Bear Pfd’s that I took a pass on, right? Even a guy as dumb as me looked at them and felt a tremor in the force… and passed.

    Think Lehman’s next for the wood block and axe treatment?

  5. njdoc commented on Mar 16


    The fed gave JPM a $30b dollar non-recourse loan. They paid $260m for BCS. Yes. It look like a bailout.

  6. cpugh commented on Mar 16

    What are any of the IB’s worth if BSC is worth $2/share? UBS $3? MER $4?, LEH $5?, MS $6?, GS $7?

    What are margin calls going to be like tomorrow?

    Do bond holders get mad whole? What is the status of CDS holder on BSC. They’re screwed too. Your bearish bet against the company loses? And your bullish bet on the common loses?

  7. Phil commented on Mar 16

    If their HQ building was worth $1.2B they were over $1B NW plus whatever they valued the Bear Trademark….truly remarkable!

  8. njdoc commented on Mar 16

    Today’s Fed actions led me to further think about the current state of our economic system. I have gone over in my mind numerous time about one fundamental question. Under what kind of system are we living? Is it Capitalism, Totalitarianism, Fascism, Communism or Socialism? Today’s action provides the most direct evidence that our system has devolved back to FINANCIAL FEUDALISM, or FEDALISM as it could be more aptly called today. This remarkable act of bailing out one investment bank so that their derivatives wouldn’t have to be marked to market proves the oligarchical nature of our society. The Lords of Wall Street are under the protectarate of the FEDal system. We the fifes must go about our daily lives and hand over increasingly large sums of our hard earned “money” to ensure the “stability of the markets”. What bonus should Mr. Schwartz receive from the taxpayers largesse? As the new Sheriff of Nottingham, Ben Bernanke, and his sidekick, Hank Paulson, go about their daily adventures in destruction of our savings by debasing our currency, we the fifes can only look upon these actions with disbelief. This is a supposed to be a democracy, yet all these decision take place behind closed door under dubious circumstances and have unknown future consequences. This has gone far enough. We should demand the immediate resignation of Ben Bernanke and Hank Paulson, and start having some transparency in our markets. These ridiculous anti-Capitalism, anti-competitive, anti-free market, Save our Crony friends at any cost policies MUST STOP! Robin Hood, where are you?

  9. UrbanDigs commented on Mar 16

    Im so pissed I sold almost all my SKF & EEV! Though I did put that $$$ into more gold.

    Is this the beginning? The end? The beginning of the end OR the end of the beginning?

    I agree with the margin call concern. What will the first big bank to go?

  10. B.B. commented on Mar 16


    Dont worry, SP futs only down -27.25, as of this… ok, this is a bottom now, right?

    Ok, I admit, I will be looking for a tradeable long within the next few days, not for LONG TERM, but a tradeable swing. Need to see capitulation first, you know blood in the streets selling, not that Cinefoz bottom calling crap. LOL

    I love that guy, always good for a laugh!!

  11. mat commented on Mar 16

    hey, moubarak just give orders that army will help to reduce the queues for bread in Egypt. aftermexican fajitas crisis, egyptian bread crisis…

  12. Ross commented on Mar 16

    My God, and Morgan didn’t even pay cash!

    Any SEC types looking into the put buying last week?

    Up the limit? Down the limit? The market is supposed to fool the majority. Sometimes the majority are fools.

    And a deserved hurrumph for a barry barry good boy.

  13. MarkC commented on Mar 16

    Paying $2/sh for that overleveraged house of cards was a gift to current shareholders. Who knows what liabilities JP has just assumed?

  14. Phil commented on Mar 16

    how appropriate is this commentary right now?

    What the Price of Gold Is Telling Us
    by Ron Paul

    The financial press, and even the network news shows, have begun reporting the price of gold regularly. For twenty years, between 1980 and 2000, the price of gold was rarely mentioned. There was little interest, and the price was either falling or remaining steady.

    Since 2001 however, interest in gold has soared along with its price. With the price now over $1000 an ounce, a lot more people are becoming interested in gold as an investment and an economic indicator. Much can be learned by understanding what the rising dollar price of gold means.

    The rise in gold prices from $250 per ounce in 2001 to over $1000 today has drawn investors and speculators into the precious metals market. Though many already have made handsome profits, buying gold per se should not be touted as a good investment. After all, gold earns no interest and its quality never changes. It’s static, and does not grow as sound investments should.


  15. Lyon commented on Mar 16

    Jim Cayne is probably through his second bottle of Scotch about now….It’s gotta be awful to watch most of your net worth evaporate over 3 days.

  16. Paul in NYC commented on Mar 16

    I have to laugh at all the mentions of this being a fraction of the value of their HQ on Madison Ave. Because it will turn out that- no, like the paper entity of the firm itself, the building is simply not worth that much.
    The crash in the residential real estate market will now hit Manhattan in full, and the commercial market will suffer along with it.

  17. Andrew755 commented on Mar 16

    Re: Looking into put buying….

    The one guy who would is stuck in his apartment dealing with this “client 9” situation. Hahah This is so amusing.

    WIll the magic hand close us green tomorrow????

  18. Dave commented on Mar 16

    A couple random thoughts:

    1) Isn’t the street supposed to go into a buying frenzy after M&A activity? (I kid… I kid…)

    2) Wow Meredith Whitney was right again.

    3) Is LEH next?

  19. B.B. commented on Mar 16


    +32.30 as of this.

    1032.10/OZ, now this is looking shortable?

    Dont get me wrong, i dont jump in ahead of the train like Cinefoz. Only AFTER The topping action has formed. And once again, only for a tradeable SHORT swing! Full disclosure, I trade very small swing trades and very rarely. So take this with a grain of salt. I daytrade for a living.

  20. mo commented on Mar 16

    Hey Phil – get your own blog if you have so much to say – but then again, none of it is your own words – spare us please

  21. Lyon commented on Mar 16

    3) Is LEH next?

    Posted by: Dave

    Fuld is on his way back from India right now.

  22. Advsy commented on Mar 16

    What about some of the big players who came in within the last couple of months?

    Do they take the Bear board out for a walk amongst the fishes? :)

    As in, were they misled too?

    The real beauty is that this event will make it harder for all the others to raise money and to garner credibility.

  23. Agoracom commented on Mar 16

    May 17, 2007

    The subprime mess is grave but largely contained, said Federal Reserve Chairman Ben Bernanke Thursday, in a speech before the Federal Reserve Bank of Chicago. While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S. economy, he said. The speech was the Chairman’s most comprehensive on the subprime mortgage issue to date.

    “Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited,” Bernanke said.

    March 16, 2008

    “I continue to believe the troubles in the subprime sector on the broader housing market will likely be limited to every bank and neighborhood in the country. So, unless you have a savings account or you own a home, you should be just fine.”


  24. Random commented on Mar 16


    You should have made a bid for their building. It was obviously going for a firesale price.

    JPM gets the upside, and the taxpayer backstops the downside. Socialism for the rich lives on.

  25. xfire commented on Mar 16

    Cayne is into second bag of the “good stuff” not the second bottle of scotch!!
    He will have plenty of time for bridge playing now.

  26. njdoc commented on Mar 16

    Several bloggers over at Calculated Risk have stated that JPM had the most counterparty risk vis-a-vis BCS; thus, this is de-facto a bailout of JPM. Does anybody have any information regarding these statements?

  27. Mich(^IXIC1881) commented on Mar 16

    Jesus! another one who put a stop-loss order at 29.50 and believes it will be executed!!
    Who are these people, how did they even make money to lose it in the stock market??!!

    Don’t get me wrong I got wiped out twice, both in 2000-2001 (bottom fishing) then in 2004 (greedy bets on chtr options after quadrupling on chtr stocks), I always saw them as a very expensive tuition.

    There are no seminars, classes, tutors exist that can teach you like getting your ass-kicked by the market.

    Looking back to those two lessons, I learned a great deal…Will I pay for any more expensive lessons? I hope not, but greed and fear have their ways of sneaking into you and getting the better of you so, now at least I am “trying” to recognize them as they approach me…

  28. bt commented on Mar 16

    I got on the computer about 9:30 est and the futures are already green. I take it that they were red initially, but the magic hand has propped them up. I still can’t believe it. How can Bear Sterns be assuring everyone that things were well under control only 3 days ago and go into a weekend and emerge practically bankrupt? Will shareholders be able to sue the company (or its new owner, JPMorgan)? Or will the congress pass a bill to give immunity to these corporate crooks in the name of “handling the financial crisis?” I don’t have a position in any financials, but curious how the Fed is throwing billions of taxpayer money to bail out banks without finding any of those executives criminally culpable for leading us to this situation.

  29. zell commented on Mar 16

    i don’t get how the .25 on the discount rate fits in either. wtf?

  30. bt commented on Mar 16

    Nevermind, I got the green quotes from Globex flash quotes page. CNN Money, however, has futures running deep in the red. I’m assuming CNN Money is accurate as it is in line with what folks have observed above.

  31. LoveThyNeighbor commented on Mar 16

    I wonder if the BSC CEO had personal assets in the company, and if he did, how much of this “support” did he get? Will anybody ever know?

  32. Morris Benun commented on Mar 16

    Of all the crazy developments that have transpired since the credit crunch hit in the summer, today’s Bears Stearns announcement is the most frightening. If the 5th largest brokerage firm, that recently had a market value of 17 Billion is being “sold” (actually liquidated) for 250M it begs the following question- what are the numerous other walking wounded financial companies worth?

  33. cpugh commented on Mar 16

    i have the futures down 221, dunno what fair value is though?

  34. anon commented on Mar 16

    wow, tomorrow is going to be an epic day.

    watch out for a coordinated move to prop the dollar this week.

  35. Winston Munn commented on Mar 16

    Credit spreads are bound to explode – the 6-month T-bill will drop below 1% – how can Fannie Mae and Freddie Mac fade that action?

    They are both leveraged higher than any of the investment banks.

    Madam Wu? Line 1. It’s Paulson, again. Shall I tell him you’re not in?

  36. Andrew755 commented on Mar 16

    re: sueing BSC….

    How do you so a company when they have nothing….NOTHING. They obviously knew from last week…

    And how does the fed rate cute fit in? Someone anyone???? 0 confidence in the fed or the goverment…….

  37. Nihilism commented on Mar 16

    BRING IT ON! Truly a bunch of dead-enders are attacking the average folks around the world now. Just Pathetic.

    This marks the end of blind-ism and an era of mild depression for bankers/HFs/PE guys.

    The good news is some of these rocket scientists and quant head PhDs will start looking for a real job.

    Another good news – we end the week on a positive note – Good Friday!

  38. john commented on Mar 16

    BR’s point entirely. What are the assets of all the other investment banks worth “today.” Marked to market we could be looking at hundreds of billions of dollars of write downs. So let’s hope, and that includes the Schadenfreudi, that this works in calming the situation somewhat. Not that I’m hopeful it will. Mind you it’s an interesting commentary on the mindset of this Republican administration. Socialism is ok when it comes to bailing out banks but not homeowners. I have a feeling someone is going to pick up on this.

  39. MitchN commented on Mar 16

    This is not good. The derivatives chickens are coming home to roost — and it looks like a scene out of a Hitchcock movie.

    10,000 on the Dow, $150 a barrel oil, and $4.50 gas by Memorial Day.

  40. robert commented on Mar 16

    Can I get three woots for SDS and gold???


    Anyone seen cinefoz? :D

  41. Carmen commented on Mar 16

    The 25 bps cut on the discount rate is also happening at the same time the Fed opening the discount window to primary dealers. That will help others that could be in the same situation as Bear Stearns with liquidity without having to wait for March 27 when the TSLF is scheduled to start.

    Can’t wait to March 27, get it? Who’s next in line?

  42. RNL commented on Mar 16

    anon: with exports our only real saving grace, propping up the dollar seems almost suicidal. As per Krugman, “if a weak dollar wasn’t helping net exports, we’d be in much worse shape than we are. Of course, others — like the Europeans and the Japanese — aren’t so happy about the dollar’s fall. But for our purposes, the $1.55 euro is about the only thing we’ve got going for us. ”

  43. Peter Davis commented on Mar 16

    Wow, this could be real ugly tomorrow. I have to second theyieldcurve’s thinking. Even though it’s such a rare event that attempting to predict it is futile, as a trader friend of mine just said to me, “This could be Black Monday tomorrow”.


  44. Mace commented on Mar 16

    Conditions are building for a sea-change.

    Sea-Change One. 1968 to 1982 witnessed sideways US retrenchment. Failure in Vietnam led to national retrenchment. The USSR expanded in Asia and Central America. Senator Church throttled the CIA. OPEC in ’72 strangled the world economy. Oil prices jumped. The Great Society spending under Johnson, Nixon, Carter combined with high oil drove inflation and a broken economy. Because we were overspending and devaluing the dollar, the French demanded the gold backing our dollar (Breton Woods agreement). Nixon closed the gold window and took the dollar off any gold support. The stock market went backwards for 14 years and gold jumped to $850 from about $45. In 1980 we had 16% interest rates, 7-8% unemployment, 6% inflation. The misery index of 16+8+6 doomed Carter.

    Sea-Change Two. 1982 to 2000 witnessed the 20th century peak of US power under Reagan, Clinton, Bush. Reagan gets credit for two things he did not do. First Fed Chairman Paul Volker jacked up interest rates to 16% to choke out inflation and defended the dollar. He got a recession, reduced inflation, and a stronger dollar. It was an adult decision that is not in vogue. The Fed then steadily reduced interest rates from about 1984 to 2002. Secondly, Big Oil and technology, spurred by the market prices, found new oil production and broke the OPEC choke hold. The oil price crashed in ’84 and housing prices crashed in TX in the late ‘80s. One in three houses went unsold all over Houston. California killed mass transit and accelerated freeway building to celebrate the new boom and cheap oil. Low energy costs, low inflation, low taxes, high innovation led to economic growth. On the political front, Reagan cut taxes, and did not cut spending. Clinton and Gingrich together, restrained spending, helped reform welfare, supported free trade and accidentally benefited from the Steve Jobs, Bill Gates PC revolution and the DOD/university internet revolution. By 2000 inflation was under control and gold was back to $250. Commodities were literally dirt cheap. But the foundation was built on the sand of increasing debt.

    Lurking in the background, from 1968 to 2006 was a revolution in the financial markets, much of it good. But Wall Street and Main Street took on ever more debt, and the Political Class led the way. Federal Debt mounted to, $9 Trillion, and Federal promises, another $45 Trillion. The dollar was unfettered by gold and the Fed could create more currency for every crisis and at every turn. Also the US and the EU drove expansion of global markets and the little Asian tigers began to stir.

    Exogenous events: BAM! NASDAQ bubble bursts. BAM! 9/11. War. Recession. Cut taxes, increase spending, slash interest rates. Crawl out of a recession. Create a housing bubble, and way overspend.

    Sea-Change Three. The global economy wakes up to free trade, the internet, and realizes that the world currency, the US Dollar, has no foundation. More importantly all commodities are priced in the USD, which are being created at every whim of the Fed, with the urging of Congress. The MidEast, Asia, and BRIC save and the US borrows. Commodities and gold rise as traders price in devalued dollar. The Fed will not increase interest rates to defend the dollar and must print more dollars at each collapse on Wall Street. The Political class promises to add more benefits to the $45 Trillion already promised but un-financed. Today, the government has already spent $30,000 per person it does not have ($9 Trillion) and promises to spend another $150,000 per person ( $45 Trillion) it does not have. And the candidates are fighting over how to further increase the spending and raise tax rates.

    What will be the Sea-change three impact: Here it gets murkey
    – The Republicans may be thrown out, for a time.
    – But will the Dems understand the underlying issues and Econ 101
    – Housing prices will return to historical averages. Three times average household income, if we avoid Deep recession
    – The Fed will be forced to raise interest rates to put a patch on the dollar, deepening the recession
    – The G10 will move to put currencies back on some modified gold standard
    – The Dow Jones index/Gold index hit 1:1 in 1981. One ounce would buy the DJ Index. It rose to about 40 to 1 in 1999. It is at 12 to 1 now. Expect it to go to 3 to 1. Dow Jones 9,000 / Gold $3,000. The Dow drops another 25%, Gold triples.

  45. bt commented on Mar 16

    10,000 on the Dow, $150 a barrel oil, and $4.50 gas by Memorial Day.

    That doesn’t sound that bad. Really, not bad at all. If we have a real panic, we would see the DOW trading close to 6000, but the PPT will be out in full force FWIW.

  46. larster commented on Mar 16

    As Bush said Friday, “We’re in a rough patch. I believe a meeting og Bear’s stockholders w/ Bush present might be truly called a rough patch.

  47. Movie Guy commented on Mar 16


    No sleep tonight.

    Tomorrow will be something else…

  48. Steve Barry commented on Mar 16

    1) Am I to believe that buying Bear for $2 instead of letting them go BK will avert a crisis of confidence????

    2) The situation is so bad, the Fed cannot wait until Tuesday to cut the discount rate?

    3) I was looking forward to Bear’s conference call tomorrow…I guess we won’t hear “great quarter guys” from the analysts.

  49. tekel commented on Mar 16

    So, I’ve got a question for you history buffs out there. When was the last time the Fed announced a rate cut on a sunday night?

  50. Winston Munn commented on Mar 16

    Guess I picked the wrong week to give up amphetamines.

  51. jagmohan swain commented on Mar 16

    In panic lies the opportunity.Another 4-5% sell off and we have the capitulation in time for a nice rally in Techs.Sell commodities, buy high quality large cap and tech.

  52. Dee Leverage commented on Mar 16

    I told you guys last week that I was conducting a global margin call…hope you took note. JP Morgan buying Bear is funny…JP may be getting a call too after I examine their $20 Trillion derivative book…Ben himself will have to print that money up for me.

  53. Keith Shepard commented on Mar 16

    Guess I picked the wrong week to stop sniffing glue.

  54. D. commented on Mar 16

    OMG. Bye Bye capitalism! Hello fascism.

  55. bt commented on Mar 16

    3) I was looking forward to Bear’s conference call tomorrow…I guess we won’t hear “great quarter guys” from the analysts.

    No, you won’t hear that. Instead you will hear “Great 8 quarters guys!”

  56. GerryL commented on Mar 16

    Fortunately, this is a Goldilocks economy. I know it is because some guy on CNBC commercial keeps telling me it is.

  57. whipsaw commented on Mar 16

    @ tekel: So, I’ve got a question for you history buffs out there. When was the last time the Fed announced a rate cut on a sunday night?

    I don’t know, but I vote for never!

    I’m thinking that something else is coming out of the can and they couldn’t afford to wait a couple of days. Don’t know what, just a suspicion.


  58. Short Man commented on Mar 16

    Finally the veil is pierced on the ‘too big to fail’ meme. Whatever other shops are in deep do-do (Lehman, BoA, et al.) are going to see a massive repricing of risk in their common equity now that we know that while the FED will do whatever it can to preserve the stability of the banking system, the bailouts will not extend to the common shareholders of the institutions that took on too much risk.

    For me, that was the biggest thing holding me back from having larger short positions but I think it is now relatively safe to march the DOW down below 10,000. Will pour my BSC profits tomorrow into LEH and BAC unless they already open down 20% or more.
    FXP looks good too as China is still way way overvalued if this continues to play out.

    Circuit breaker day??

  59. bh commented on Mar 16

    $2 a share? what’s to stop someone else coming in and bidding $5 for BSC???

    by the way, JP Morgan is Bear’s clearing agent, they had/have full transparency into the assets held by BSC.

  60. tekel commented on Mar 16

    let’s close that italics tag. I’m also willing to bet that the answer is “never.” But I’d like confirmation…

  61. jojo (brion) commented on Mar 16

    3) Is LEH next?

    LEH is sooooooo next…

  62. tekel commented on Mar 16

    and, what’s to stop someone from bidding $5? the sneaking suspicion that even $2 is about $3 too much. I think bear is underwater already, and that not even a fire sale could bring their accounts out of the red.

    The funny thing is, I’ve heard rumors that JPM is in the same situation.

  63. dukeb commented on Mar 16

    This entry is to end the italics that somebody forgot to shut off!

  64. whipsaw commented on Mar 16

    hmm, actually the italics wasn’t my fault.

  65. dukeb commented on Mar 16

    No, whipsaw, but it was beautiful the way you fell on the sword! Will you be my broker? lol.

  66. Ryan commented on Mar 16

    Recession or depression? I say depression. Anyone else want to weigh in?

  67. Francis Hwang commented on Mar 16

    maybe this’ll close it?

    I’m not clear on the mechanics of this: If the market values BS at $30, and JPMorgan is going to buy at $2, how can they do that? What’s to prevent various shareholders from dragging their feet?

  68. Dee Leverage commented on Mar 16

    Tell me you can’t see this tomorrow…Dow down 700 points…rallies to down 600…Erin Burnett gushes “market is definitely off its worst levels of the day!!”

  69. David commented on Mar 16


    I have lost all hope in our government!
    There is an old saying, “An Appointed Time for Everything, a time for riches and a time for poverty, like the whisper that faded away into the mists of the past,
    never to be seen again.
    Market souldiers are citizens of death’s gray land, Drawing no dividend from time’s to-morrows. In the great hour of destiny they stand, Each with his feuds, and jealousies, and sorrows. Each Soldiers are sworn to action; they must win Some flaming, fatal climax with their lives. Soldiers are dreamers; when the guns begin They think of firelit homes, clean beds, and wives.

    We need a new bank holiday!!!!

    “Wise men never sit and wail their loss, but cheerily seek how to redress their harms.”
    William Shakespeare

  70. Paul in NYC commented on Mar 16

    Depression? Well, the NYTimesseems to have “weighed in” and their headline now reads:
    Fed Acts to Rescue Financial Markets
    Since this now goes beyond BSC, I’d say you can’t get much heavier than that.
    Depression it is.

  71. Andy Tabbo commented on Mar 16

    I’ve been skeptical of the stock market for a few years now. Early and wrong. But now, based on Elliot Wave Theory, we should see some bottoming action in the 1220-1230 area for a 1=5. We’re getting close to a bottom on this FIRST move down. We’ll get a big big rally after this is done 1400-1440 in the cards. Ultimate target for the S&P is 1080-1100 zone…with a distinct possibility of 780 ish if that zone fails to hold…lots and lots of good swings to trade next few years….buckle up. Buy the 10 yr bond on any good dips for next few years…’ll be the only financial instrument that holds up until 2010.

  72. a guy called john commented on Mar 16

    LOL’r from the Times story:
    In a highly unusual maneuver, Fed officials said they would minimize the central bank’s own risk by taking direct control over Bear Stearns’s huge portfolio of financial assets.

  73. Short Man commented on Mar 16

    “I’m not clear on the mechanics of this: If the market values BS at $30, and JPMorgan is going to buy at $2, how can they do that? What’s to prevent various shareholders from dragging their feet?”

    – – – –

    $30/share was just a point in time value on a company whose marketcap was evaporating by billions a day over the past few days as information gets revealed. JPM obviously gets sent some spreadsheets/data room stuff and sees that BS’s holdings are on par with Mr. Burns holdings in Confederated Slaveholdings, Transatlantic Zeppelin, Amalgamated Spats, Congreve’s Inflammable Powder, and U.S. Hay. I think Baltimore Opera Hat Company is worth more than $2/share….

  74. Marcus Aurelius commented on Mar 16

    But will the Dems understand the underlying issues and Econ 101.


    At this point, the Republicans look like grade school drop-outs. Total and absolute repudiation of their economic philosophy is happening. Any leadership at all would be an improvement.

  75. Michael Estes commented on Mar 16

    Runaway consumerism is dead. Here’s my list of some of the most obvious victims.

    1. Circuit City(CC): They might as well go ahead and put the closed sign up in the window. They deserve whatever comes at them. A few years ago when they started firing productive, veteran employees and replacing them with 17 year olds in order to save money, I knew the writing was on the wall.

    2. Pier One(PIR): so 90’s.

    3. Cost Plus Inc(CPWM): I’d much rather shopping be at Trader Joe’s.

    4. Wilson’s Leather(WLSN): This one’s been on life support for years.

    5. Hott Topic(HOTT): Hey, punk, mom’s credit card is maxed out, guess you can’t spend anymore.

    6. Heelys(HLYS): Kids skating when they should be walking annoys me. No great loss.

  76. Michael Estes commented on Mar 16

    Our nation’s balance sheet looks like someone took a bank ledger and sh– all over it.

  77. CDizzle commented on Mar 17

    To finish the Steve McClusky trifecta:

    “They’re comin’ right at us!!!!”

    (turns around, runs and jumps out of tower window)

  78. Winston Munn commented on Mar 17

    I keep having this vision of an army of press corps members crowded into the Bear Stearns lobby and someone says, “We need to get some pictures.”

    Makes me wonder who got the Monet.

  79. Dee Leverage commented on Mar 17

    Only way out…Bush threatens to nuke the world unless they all lower rates to zero. Dollar rallies, Kudlow says we are right on America.

  80. jojo (brion) commented on Mar 17

    “At this point, the Republicans look like grade school drop-outs. Total and absolute repudiation of their economic philosophy is happening. Any leadership at all would be an improvement.”

    you’d be surprised. As i posted a few days back, the dreaming tools are more loyal to their misconceptions than post WWII Nazis.
    I’ve seen them post, with NO sense of irony, how if the Dems take control in ’08 (as expected) their reckless Liberal spending will destroy the economy. lol

    There will be no repudiation for neo-ons and their unpleasant ilk. After all, W wasn’t a “real” conservative ya know. He was a LIBERAL in conservative clothing!!! (never mind that we had 4 years of solid/total Republican (politburo) control.

    i hate the bastards.

    and now it’s there (once again) for all to see….”Meltdown” IS Republican rule.

  81. Dee Leverage commented on Mar 17

    Serious question…whay doesn’t CNBC run this programming every night? It is CNBC World…regular CNBC, but with twice the IQ and cool accents.

  82. Diogenes commented on Mar 17

    WSJ article says $30 B financing is such that Fed will bear the loss, not JPM, if BSC’s “less liquid” assets go belly up.

    This means that this is a taxpayer funded bail-out/guarantee. It’s the Resolution Trust Corporation without calling it that.

    As for domestic financials, in my opinion, T Rowe Price (TROW) is the best. $ O long term debt, current ratio of 3. Yes, I own shares.

  83. Jim commented on Mar 17


    What you have described is just the kind of thing I have predicted for many years.

    Back when I lived in New Orleans, James Baldwin came to speak—it was late 1985 or early 1986. At the Q&A afterwards, I asked him: “What happens if the United States sees itself losing its position of dominance? Its addiction to power is such that I can easily see it choosing to destroy the world rather than settling for being less than Number One.”

    I found his answer most unsatisfactory. He implied that extra-terrestrial, or perhaps divine, intervention would keep the U.S. from nuking the world.

    Interestingly, though, he did not deny that the U.S. might feel compelled to try.

  84. Chief Tomahawk commented on Mar 17

    “Serious question…whay doesn’t CNBC run this programming every night? It is CNBC World…regular CNBC, but with twice the IQ and cool accents.”

    Dee, I too, am a fan. The guests on CNBC World to be quite insightful and blunt compared to the fluff on CNBC U.S.

  85. rockitz commented on Mar 17

    So that’s a short on LEH?

  86. jojo commented on Mar 17

    “So that’s a short on LEH?”


    and a short on the Republican party ;)

  87. Michael commented on Mar 17

    Question: if you bought credit default swap protection on Bear, does the $2 buyout mean the writer of the protection does not have to pay out? My guess is yes.

  88. Douglas Watts commented on Mar 17

    At this point, the Republicans look like grade school drop-outs. Total and absolute repudiation of their economic philosophy is happening. Any leadership at all would be an improvement.

    Yup. The keystone of the Republican brand had been that Republicans will at least turn a penny back and forth before spending it, because “it’s not the government’s money.”

    That’s now been blown to hell.

  89. halbhh commented on Mar 17

    It’s no pleasure at all to point it out….

    But my mention of Japan 1990s months ago is not the only model to look at now.

    The Argentina experience is another model, and probably more likely.

    But….the US isn’t a country that’s as likely to be stuffed down as Argentina.

    The Fed is the wildcard.

    So while Argentina is a possible model, we’re most likely of all to just do some new kinda thing, like nationalizing not just the mortage market, but much of the housing stock.

  90. JustinTheSkeptic commented on Mar 17

    Markets going up tomorrow, big time, too much negativism. Contrarians, put your bull caps on!

  91. RNL commented on Mar 17

    JustinTheSkeptic: no bulls here. Cinefoz said we were too depressing! :-(

  92. RNL commented on Mar 17

    I’m sure he’s making tons of money on his longs anyway.

    Oh wait.

  93. Laffin Lenny commented on Mar 17

    Paulson to US$, “Call it…friendo.”

    Fed is wiping up BS’ shyte with $20B.
    Three months ago Bush said Dem’s $20B
    H&HS, “would destroy the US economy.”
    Well now, Bush got one part right!!!

  94. Toulouse Loitre commented on Mar 17

    Carlyle Capital, the used condom for Carlyle Group’s radioactive Liar-level mortgage-f–k holdings, wadded up and IPO’d off the books, announced tonight it’s walking away from $22B in debt securities held by Deutsche Bank and JPMorgan, making this day the first $40B loss in a single day that the Fed has ever taken, (that we know of anyway), 20x Silverado S&L,
    then who shows up with his TGH, but McCain,
    “100 years, a 1000 years, a 1,000,000 years!”

  95. John commented on Mar 17

    What’d BSC pay out in xmas bonuses last year?

    It feels like all of Wall Street really stretched to keep the wheels from falling off until after xmas.

  96. bthunder commented on Mar 17

    Sorry to learn that Barry is not going to get Bear Stearn’s building…

  97. wisedup commented on Mar 17

    maybe JP Morgan’s building is even nicer!

  98. mat commented on Mar 17

    greenspan : this crisis should be the worst since WWII .

  99. kennycan commented on Mar 17

    Obama will save us. He’ll reappoint Volcker. I’m sure of it.

  100. PFT commented on Mar 17

    I mean hey, JP Morgan owns a chunk of Federal Reserve Bank of NY. Nice deal getting Bear Sterns for 10 cents on the dollar. The Fed will then dump the losses generated from the crap they accept on us.

    All depressions/recessions result in the Big Boys getting Bigger and Fatter.

    The shareholders are irrelevant in todays world of interlocking directorships and CEO’s and other executives getting tens of millions in bonuses and golden parachutes. Pity the poor Bear Stearns shareholders who fell for their line of having sufficient liquidity. If Spitzer was around he might have went after them, but he’s been Spitzerized (maybe thats why)

    Whose next to go?.

  101. Michael M commented on Mar 17

    “America, we know this is year of the rat, but you sell two buck bear, we say no more Chinese soup for you!”

    On a more serious note, Cramer wrote Wednesday “Come on Bears! We really need the bears to kill this rally here”. I mention this not to be a Cramer-basher, but because Cramer’s words are a symptom. I don’t know how it’s all going to end, but any reasonable person can see that we are on the edge of potential disaster. But are people truly puking stocks and running for the hills? No, they are trading every bounce, looking for upside in every Fed and government news and if is any indicator market participants are comparing every new daily disaster to previous meltdowns for signs of a bottom. And so Cramer’s bring ‘em on is another sign of the complacency that comes from living too long in a bubble.

  102. BG commented on Mar 17

    A couple of thoughts:

    Recent events will propel London as the world financial leader and remove any doubt about NY passing the baton.

    If the US dollar doesn’t stabilize soon, look for oil to start being priced in Euros in lieu of US dollars.

    Basic commodities will crash, deflation not inflation will be the greater concern. The coming economic downturn can not support current commodities prices.

    Interest rates will go to zero in the US for a while.

  103. BG commented on Mar 17

    One last thought.

    Taking the NYSE Exchange public a while back was a decision made with great thought and debate by market insiders. It looks like their view into the future was correct. They lost the US retail investor in 2000/2001 and now they have lost the rest of the world. It will come back over time and a lot of money will still be made; but, it will take years to straighten up this mess and restore any kind of confidence in the market.

    Thinking about a $60 BSC at the open last Friday morning and what has happened since can knot your stomach if you think about the fact somebody took that trade.

  104. rj commented on Mar 17

    CNBC this morning just said that the dollar became the new carrying currency cause it’s so cheap. And one of the anchors said in an inquisitive tone, “So we’re the new Japan?”

  105. RNL commented on Mar 17

    rj: sure, the new Japan, without the fiscal responsibility and savings!

  106. Dee Leverage commented on Mar 17

    Let me tell you a story about Japan. Ten years ago, as part of my MBA program, I visited Japan and took a tour of Tokyo with a Japanese friend. I saw some very large, pretty buildings and asked him what they wer…he said they were empty buildings built in the “bubble time”. I never forgot that and a few years ago, realized that everything that happened to Japan will be the fate of the US and possibly even worse, as we are a debtor nation with no savings and a bent for finacial alchemy.

  107. kennycan commented on Mar 17

    Japan fiscal responsibility? Isn’t their debt/GDP ratio 160%?

  108. wnsrfr commented on Mar 17

    Hey, I just realized, I’ll bet Ben Stein owns shares in Bear Stearns…after all, with all the discounts in the stock last week, he must of snapped-up a bucketful; relying on his knowledge that the mortgage-backed securities were just a tiny fraction of the financial markets!

    Can anyone guess how many shares of Bear Ben owns?

  109. Rated….ehhh commented on Mar 17

    Obviously rules are changing daily but what happened to shareholder approval? And what does that make this transaction in literal terms besides a bailout?

  110. Eric commented on Mar 17

    Please God, let Ron Paul be vice president at least… Try to find any other politician who talks like this about the price of gold!

    Freedom of the press is for those who own one:

  111. Random commented on Mar 17

    “The Argentina experience is another model, and probably more likely.

    But….the US isn’t a country that’s as likely to be stuffed down as Argentina.”


    Our debts are dollar denominated. We can crank the printing press and pay off every public and private creditor tomorrow. While the damage to economy would be substantial, we’re not Argentina.

  112. JL commented on Mar 17

    Here’s an interesting observation. It cost JPM less to acquire all of BSC ($236M) than it would to buy out A-Rod’s contract ($275M).


  113. JL commented on Mar 17

    Hat-tip to for the A-Rod note.

  114. Easton commented on Mar 20

    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.

  115. JP commented on Apr 12

    The BSC ordeal was a complete joke, and we haven’t seen the last of this mess I can assure you.

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