Bear Stearns

NEW -> Contingent Buyer Assistance Program
Anonymous rumor attributed to a Lehman insider that <a href="http://dealbreaker.com/2008/03/the_lehmanites_strike_back.php">Goldman Sachs</a> brought down Bear and is now gunning for Lehman. GS is reputedly particularly ruthless even for a Wall Street firm - they were the one shorting MBS left and right even as they continued to underwrite them.
 
<i>The shorts can not screw a company which has not already screwed itself. It would have mattered if Bear Stearns was solvent.</i> <p>

That's just not so. A perfectly solid bank can go down in a run. Before the Fed, it happened all the time.
 
Watch Wamu (WM) Downey Savings (DSL) and one that seems to be flying under the radar but will probably take some mojor hits soon Wachovia (IWB)
 
<i>"That's just not so. A perfectly solid bank can go down in a run. Before the Fed, it happened all the time."</i><p>

Yes, it is so. If it is solid and has reserves, not fractional reserves, no one and no run can bring a bank down. I do not think you understand what solid is. No bank in a fractiional reserve banking system is solid. They are all leveraged toilet paper, and we are starting to see what history always does to a fractional reserve banking system based on fiat currency.
 
Have you read <em>Extraordinary Popular Delusions and the Madness of Crowds</em> by <a title="Charles Mackay" href="http://en.wikipedia.org/wiki/Charles_Mackay" linkindex="74" set="yes">Charles Mackay</a>? The story of the Mississippi Land Company and John Law is fascinating. John Law created the first paper currency. The history of fiat currency and the problems France had because of it are great reading. It is interesting that all of the laws we have passed to make fiat currency viable were tried by the French in the early 1700s, and they failed miserably. Gold left the country in large amounts, and the paper currency lost all value.





I highly recommend the book.
 
I have not read that particular book, but I have read of John Law. I thought the Chinese had the first fiat currency, but I do not remember what it was made of.
 
One thing about John Law, if you read the history on what he did, his currency system was not a fractional reserve. He was adamant about there being a one-to-one relationship between the paper currency and the amount of gold in banks or the national treasury. Unfortunately, he worked for the French King who was an absolute monarch. When the French King decided to print some free money to fund his spending, there wasn't much John Law could do about it. Once word got out that the one-to-one relationship was bogus, the currency rapidly lost value. The French King tried to stop this by passing laws that the currency had to be accepted at face value (sound familiar to US Dollars.) People took the paper, bought gold at face value, and took it out of the country. Of course, this left bagholders when there was not enough gold to go around. I could go on, but it is worth reading the story.
 
<p><a href="http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/18/cnlewis118.xml">Billionaire Lewis moves to block JP Morgan</a></p>

<p> <em>The offer, values the stricken investment bank at 1/15th of its closing $30 share price on Friday evening, and at a fraction of Bear's 52-week high of $159.36 last spring. Mr Lewis, the East End-born currency trader with a fortune in excess of $5bn, is known to be actively involved in a number of alternative strategies, including talking to a number of potential rival bidders who might act as a white-knight on behalf of Bear's major shareholders.</em></p>

<p class="story"><em>Other options he is considering include voting against JP Morgan's offer at the scheduled shareholders' meeting, something that would only work if he were to garner the support of other investors.</em></p>

<p class="story"><em>The largest investor in Bear is American fund manager Barrow, Hanley, Mewhinney & Strauss, which is part of Old Mutual, and owns a 9.7pc stake. Bear's 15,000 employees own about 30pc of the bank's equity and, given that many of those shares were earned in lieu of pay and bonuses, they are likely to support any strategy that increases the eventual payout.</em></p>

<p class="story">And according to the article, the $1 Billion was invested with straight cash and not, I repeat NOT, leveraged.</p>
 
<p>Gengis Khan and his relatives had a paper currency. If you read marco Polo, he relates all sorts of wondrous fairy tales from his travels, including stuff from the Mongols and the Chinese. And then he says with dead seriousness and wonder and amazement, worthy of awgee and Graphrix, you won't believe this one dear readers. These people use paper currency!!! And people accept it!!! And goes on in that vein for a while.</p>

<p>After being highly regarded and used as an emissary for years in China, he returned to Florence? Venice? And got thrown in jail where he dictated his memoirs.</p>
 
<em>>>People took the paper, bought gold at face value, and took it out of the country. Of course, this left bagholders when there was not enough gold to go around.</em>





This is likely the reason that US citizens could not own gold until we came off the gold standard.
 
<p>This is hilarious. It just shows you how stupid the folks are who are bidding in the stock market. BSC is selling for over $5 when JPM is buying it for $2 and it is worth $0.</p>

<p>Nude - What is the deal? We oft go off topic.</p>

<p> </p>
 
So realistically speaking, judging from the current situation, where's the "safest" place I could possibly put my money right now? Should I just walk into BOA and open a CD and dump everything there. I currently have it in a money market with Indymac.
 
<p>Here's an excerpt from <a href="http://www.nytimes.com/2008/03/17/opinion/17krugman.html?em&ex=1205985600&en=6a7c992f84f9b3f6&ei=5087%0A">Krugman's column in the <em>NY Times</em>:</a></p>

<p><strong>"...So here’s the question we really should be asking: When the feds do bail out the financial system, what will they do to ensure that they aren’t also bailing out the people who got us into this mess?</strong></p>

<p>Consider what happened last Friday, when the Federal Reserve rushed to the aid of Bear Stearns.</p>

<p>Nobody expects an investment bank to be a charitable institution, but Bear has a particularly nasty reputation. As Gretchen Morgenson of The New York Times reminds us, Bear “has often operated in the gray areas of Wall Street and with an aggressive, brass-knuckles approach.” </p>

<p>Bear was a major promoter of the most questionable subprime lenders. It lured customers into two of its own hedge funds that were among the first to go bust in the current crisis. And it’s a bad financial citizen: the last time the Fed tried to contain a financial crisis, after the collapse of Long-Term Capital Management in 1998, Bear refused to participate in the rescue operation.</p>

<p><strong>Bear, in other words, deserved to be allowed to fail — both on the merits and to teach Wall Street not to expect someone else to clean up its messes.</strong></p>

<p>But the Fed rode to Bear’s rescue anyway, fearing that the collapse of a major investment bank would cause panic in the markets and wreak havoc with the wider economy. Fed officials knew that they were doing a bad thing, but believed that the alternative would be even worse.</p>

<p>As Bear goes, so will go the rest of the financial system. And if history is any guide, the coming taxpayer-financed bailout will end up costing a lot of money..."</p>

<p> </p>
 
FWIW and IIRC, I read somewhere that Bear was a clearing house for a lot of brokerages that didn't have them in house. If that's the case, then maybe this really was more of an "orderly liquidation" than a bailout.
 
<p>I do not think it is a bailout of Bear Stearns. The stockholders, owners of the company, lost everything. This is a bailout of all the other IBs holding OTC derivatives in their portfolio.</p>
 
This has been a round about way for the government to intervene without setting up another overt, huge buerocracy like the Resolution Trust Corp again. This is essentially doing the same thing as the RTD did then shifting all the risk to the taxpayers without really admiting it
 
You must log in or register to reply here.
Back
Top