What does the Bear Stearns buyout mean?
JP Morgan Chase and Co. got a fire-sale price when they bought investment bank Bear Stearns for about $2 per share.
The government offered reassurances to Wall Street on Monday that no other financial institutions were set to collapse. Especially scary was the swiftness with which Bear Stearns was forced to sell out, for just 10 percent of its market value last week.The Federal Reserve Board acted swiftly to allay fears that Bear Stearns' problems would set off a chain of other investment banks faltering. The Fed cut its emergency lending rate to financial institutions to 3.25 percent from 3.5 percent Sunday night two days before its scheduled meeting today.
It guaranteed JPMorgan's deal for Bear Stearns, backing up to $30 billion of Bear's most troubled assets: mortgage securities that have plummeted in value and have become tough to sell. The central bank also set up a lending option for firms, including many nonbank financial services firms, to secure short-term loans for a range of collateral.
The market remained extremely volatile. The sale of Bear Stearns - at a minuscule $2.21 a share as of Monday's close, or a total of $260.5 million - stirred fear among investors worldwide about other banks' exposure to the troubled credit markets.
"The real problem - and the one that should scare investors more than anything right now - is that even Bear Stearns' senior management didn't have a good grasp of their financial problems until things fell apart," said David A. Twibell, the president of wealth management at Colorado Capital Bank. "To the extent the current credit crisis stems from a lack of confidence in the financial system - which I believe it does at this point - it's hard to rectify when even those closest to the situation lack accurate information."
Hogar I think there is a big push among the wongs on the right to lay this mess at both greenspan's and the lending industry's doorstep. I really believe that a portion of the blame for this cluster we call an economy can be laid at the feet of both the aforementioned bit players...but as you well know...there are much larger fish to fry on this issue. Sure they should have increased oversight (and possibly regulation) on the lending industry. Sure Greenspan should have crowed a little more loudly at rising energy costs costs coupled with increased healthcare costs coupled yet again with the increased insurance costs. Sure there were plenty of people who have predicted this slow motion train wreck for years.
Then again...you might say that hindsight is always 20/20, but we both know that there were a lot of notradamesus's on this one...including our good man alan (this fact makes it even harder to swiftboat ag...as he's been right about pretty much everything all along).
my point is that there is plenty of blame to go around...you may as well give the republicans their fair share just this once.
Posted by jay on March 18, 2008 11:17 PMI like the inflation index poll link below. A major cause is rising energy costs.
Gee you think invading Iraq was such a great idea? Oil was 50.00/ barrel and gas was 1.60. Saddam was running it and no alqueda there either.
Boy those were the good ole days
Posted by on March 18, 2008 05:25 PMHogar-
Don't forget about the basics. Murphy's law will have a field day given the opportunity. No matter what the situation.
Spitzer - had sex with a high priced prostitute because he could. He had the cash, time, place, alibi and desire. FYI, I heard our favorite actor Charlie Sheen was a client of hers. She was doing something right for a Charlie Sheen referral, he doesn't waste any time when it comes to paid sex.
Back on to mortgage. The meltdown happened b/c it could. The industry went too unregulated. Under regulation means cheating and lying will come into play to make the biggest profit.
No documentation loans.
% only loans to high risk clients.
The mortgage lending industry was begging for a disaster. This was no over night the dam broke and New Orleans is now flooded disaster. This was a calculated and controlled meltdown and the nerds with calculators predicted the model.
Like I said over a year ago, it was musical chairs with the end of the month loan portfolio's that are sold to Country Wide or Bear Stearns. Last person holding the folders (notes) loses. The object was to originate loans, wholesale loans, then sell them at the end of the month in a package and not look back.
I know you hate big guv't. Most of us agree. However, proper regulation no matter what the industry makes for a better game. This never had to happen.
Posted by Tree on March 18, 2008 04:59 PMJay,
I guess Greenspan would know about a problem that is squarely on his doorstep with overly low interest rates and allowing the selling of junk mortgages with no concern at all.
Posted by Hogar De Vuelta (العودة) aka ignorant strawman warmonger racist withsome friends on March 18, 2008 03:58 PMGreenspan said recently that "the current economic crisis is likely to be judged in retrospect as the most wrenching since the end of the second world war".
I can't say that makes me feel warm and fuzzy
Posted by jay on March 18, 2008 03:42 PMI seriously doubt that tbone listens to Peter Boil
Posted by just sayin' on March 18, 2008 03:10 PMBSC was selling at 160 last year and last week it had a book value of 80. So the 2 dollar "buyout" means that all the execs with stock and stock options will have to postpone their planned retirements. No gold Rolex anytime soon.
If the $2 buyout price holds, they got totally wiped out. Obliterated. Let's hope that this financial black hole sends a message. And let's hope that those unqualified slackes who stole adjustable rate and interest only loans get foreclosed by the hundreds of thousands. No, make that millions. Today's foreclosure is tomorrow's affordable housing!
Posted by SASQUATCH on March 18, 2008 02:45 PManother 3/4 point rate reduction...can anyone say inflation overload?
http://money.cnn.com/2008/03/18/news/economy/cnn_poll_inflation/index.htm?eref=rss_topstories
a bail out for the rich while the rest of the country struggles? why should any of us be surprised at this move by the party that has actively shifted more debt onto the middle class from the upper class? TRILLIONS, people....TRILLIONS
Posted by jay on March 18, 2008 02:17 PMWhat does the Bear Stearns buyout mean? It means it pays to be rich and sucks to be poor.
Posted by history buff on March 18, 2008 01:53 PMTbone at 826,
The least you could do would be to give Peter Boyles credit for the line, "Privatize the profits, socialize the costs." I heard it this morning and agree 100%. This is why I want less government, because the only difference between Republicans and Democrats anymore is who is getting screwed and who is paying. That's why I was willing to overlook a few things I didn't like about Ron Paul, because he wanted to end the whole seesaw cycle of one half of the country getting screwed and one half paying and then trading places.
Posted by Hogar De Vuelta (العودة) aka ignorant strawman warmonger racist withsome friends on March 18, 2008 01:22 PMjaw-dropper of the day:
When Bear Stears was sinking, the Fed threw them a $30 billion lifeline — one we’re expected to pay for. When NOLA was sinking, Bush spared them 10.5.
Posted by Tbone on March 18, 2008 12:23 PMIt really means the Fed is trying like hell to reinflate the real estate bubble it popped by hiking interest rates last year.
And it also means the Fed can't control inflation. And we need to extend the tax cuts. Get out of iraq and get Bill back into the whitehouse
Posted by on March 18, 2008 12:14 PMDude, what are you talking about? Its been bearing its fruit (assuming you're rich) since the beginning of his "administration".
Posted by Tbone on March 18, 2008 11:26 AMThe Bush Economy finally bears it's fruit.
Posted by on March 18, 2008 11:04 AMAbsolutely. Socialism is awesome when its for the rich, evidently.
Posted by Tbone on March 18, 2008 10:48 AMSocialism for the rich, plain and simple. We can bail out the wealthly when they make mistakes, but not the average people who got caught up in this mess.
Who ever thought running a war on an economy based on tax cuts, borrowed Chinese money and smoke and mirrors wouldn't work!
The gov't has money for a buyout, but when it comes to healthcare, sorry! You lose.
Privatize the profits, socalize the costs. SOP for the bush "administration" for the last 7 years.
Posted by Tbone on March 18, 2008 08:26 AM
