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About This Page: This is a discussion on Politics within the LetsGoKings.com forums, at Los Angeles Kings Hockey Fan Forum. So now Bear Stearns is being bailed.
Stunned Bear Stearns investors eye legal claims - Yahoo! News
50 to 2 share overnight.
How much worse is this going to get?
What, cutting taxes during wartime, printing more dollar bills and selling bonds to China didn't save the economy after 9/11? C'mon...you lie!
It's funny. Virtually every personal finance guru (even the bad ones) will tell you that borrowing money to spend it on idiotic crap is insane. Yet the US govt continues to be the worst example for all to see in finance management.
jom
__________________ Old men's room wall saying: Flush hard, it's a long way to Washington
This Bear Stearns deal just doesn't smell right to me. As the article stated, just last Wednesday the CEO was stating that everything was fine. I'll be interested to see the outcome of this.
Anybody with a brain saw this coming. I don't care how good it of a run it was, business is cyclical. People scoffed at me 7 years ago with my fixed mortgage loan on a house I could ACTUALLY afford. Who's laughing now?
Luckily for me, I grew out of my "keeping up with the Jones'" mentality years ago. I may not be depresssion proof, but at least I am recession resistant (up to 500ft).
edit: I thought I should add that I don't totally blame consumers in this mess. The banks share an equal part of the guilt. Not only should the consumers have known better, but so should have the banks! After all, they gave the people the money to bury themselves with.
__________________ LA Kings Hockey - Disappointing Kings fans since 1967!
Last edited by DRice; March 17th, 2008 at 01:21 PM.
I thought I should add that I don't totally blame consumers in this mess. The banks share an equal part of the guilt. Not only should the consumers have known better, but so should have the banks! After all, they gave the people the money to bury themselves with.
You had mortgage brokers trying to get as many deals as possible since that was were the money was. Once the loan closes they sell off the cash flow to some mortgage-back security or FANNIE MAE. The broker is off doing another deal by the time the new mortgage is NOT being paid upon....
There is so much fraud (IMO) going on in the housing industry it's ridiculous. There were questionable appraisals, brokers taking kick-backs, people using "straw men" buyers to bilk money out of banks (using the aformentioned bad appraisals)....it was like a feeding frenzy.
But...as we all know someone ends up having to pay for this....which usually means us peons.
The Bear Stearns collapse is a result of sub-prime mortgage meltdown, not because Bush went to war or cut taxes. If anyone is to blame its the over-aggressive nature of Bear Stearns policy directors. They chased securities that they new were over valued and that at some point cash calls would be coming in on them and there would be no way to cover it.
Furthermore, there was a provision passed 1999 that repealed the Glass-Steagall act of 1933. Essentially this lifted the restrictions between Commercial and Investment banks that had existed. After this, Commercial giants like JP Morgan (which is in the process of buying the pieces of Bear Stearns) were exposed to Fed lending but brokerage firms like Bear wasn't. Now any kind of direct lending from the Fed to Bear could have been used on any cash calls that Bear got to shore up confidence and whether this storm because for all intents and purposes, Bear's balance sheets weren't incredibly weak. The Fed allowed this type of lending last week to avert a major financial crisis, but the writing was already on the wall for Bear Stearns and investor confidence was shot, anything at this point was too late.
I only bring this up because Bush bashing has become the parlor game du jour for the last couple years. However if you look at the seeds of what led to Bear's collapse you can go back to the Gramm-Leach-Blilley act of 1999 and get a good idea. This law was signed into existence by Bill Clinton, with major Republican support as well. But to simply blame Bush for everything is short-sighted and does not show a command of the issues at hand.
With that said, I feel deeply for the 14,000 employees of Bear Stearns whose hard work has been shot down the drain by a couple greedy people at the top.
As for the $2 share price JP Morgan is offering, this price came about because the Fed pretty much said we'll back the deal if you can get it done today (meaning this last Sunday) because the only other choice is bankruptcy and we may not be there tomorrow after the markets have another day to batter you. Speed was of the essence because the Asian markets were to open and with Bear continuing its free fall, confidence could begin to fall at other brokerage firms with sizable sub-prime exposures like Lehman Brothers. From all the people I have talked to and the things I have read, this price, while unfortunate, was unavoidable because collapse was imminent.
__________________ University of Denver Hockey...lets bring it home boys!
Last edited by SicSemprTyranis; March 18th, 2008 at 01:35 AM.
Obviously but Congress approved. They are as much if not more to blame than Bush.
By who? I'm curious how this works....
jom
Good question...its much like the bank runs of the 1930's, only this time its institutional investors rather than shlubs like you and I.
Basically, mortgages were sold from the orginal lender and packaged into tradable securities in bunches. Firms like Bear Stearns were very active in this market because the return rates they could get on them were high because they carried a fair amount of risk. Because so many new mortgages were being originated, the risk never was questioned because there were always the money from new ones to cover the old ones. When people started defaulting on these mortgages, the return on these bundled securities started falling. Well the institutional investors that held these started bailing on them and started cash calls on Bear Stearns to recover what money they might still get but Bear Stearns did not have the liquidity to cover all this. Rather than pulling out our money from checking and savings accounts at a normal bank, these investors started pulling out of securities that were run by Bear Stearns.
The major component of all this is Bear Stearns illiquidity position to handle a potential crisis. Thats why the Fed is backing JP Morgans purchase of Bear with 30 billion dollars, so as to assure investors that there is cash on hand and avert any further crisis.
I only bring this up because Bush bashing has become the parlor game du jour for the last couple years. However if you look at the seeds of what led to Bear's collapse you can go back to the Gramm-Leach-Blilley act of 1999 and get a good idea. This law was signed into existence by Bill Clinton, with major Republican support as well. But to simply blame Bush for everything is short-sighted and does not show a command of the issues at hand.
With that said, I feel deeply for the 14,000 employees of Bear Stearns whose hard work has been shot down the drain by a couple greedy people at the top.
As for the $2 share price JP Morgan is offering, this price came about because the Fed pretty much said we'll back the deal if you can get it done today (meaning this last Sunday) because the only other choice is bankruptcy and we may not be there tomorrow after the markets have another day to batter you. Speed was of the essence because the Asian markets were to open and with Bear continuing its free fall, confidence could begin to fall at other brokerage firms with sizable sub-prime exposures like Lehman Brothers. From all the people I have talked to and the things I have read, this price, while unfortunate, was unavoidable because collapse was imminent.
1). Bashing the Bush administration--which is entirely appropriate--doesn't mean Clinton is off the hook. Clinton and the Democratic Leadership Council are full on Wall Street speculation enablers just as much as Bush is. The mainstreams of both parties are essentially indistinguishable on issues of Wall Street regulation. Clinton is basically what used to be called a "Rockefeller Republican."
2). I'm not going to say a handful of bandits at the top of Bear Stearns didn't devise their strategy and are probably set to golden parachute themselves into comfy retirement, but the employees are hardly blameless. Reports are that 30% of Bear Stearns stock was owned by the employees. That is way out of whack with what is usually the case. They took a risk to cash in, the dealings were stupid and corrupt and now some of them are going to have to move to Cleveland and work in a Kinkos.
3). 2$ a share was highway robbery by JPMorgan. The Bear Stearns building in Manhattan is worth something like 1.2 Billion and that asset alone should make the purchase about 8$ a share. Now Morgan gets to look through the portfolio of Bear and hand over up to 30 Billion in worthless 'assets' to the Federal government to cover with the 'insurance' the Fed gave them.
This probably needed to be done to try and stabilize financial markets, but that doesn't mean that it isn't a giveaway too. It should mean that I don't have to listen to a bunch of blowhards argue self-servingly and self-righteously that we live in a 'free market' capitalist system where 'risk' should be rewarded by huge profits to encourage 'entrepreneurship'...blah, blah, blah.
__________________
"For if once a man indulges himself in murder, very soon he comes to think little of robbing; and from robbing he comes next to drinking and Sabbath-breaking, and from that to incivility and procrastination." Thomas DeQuincey, 1700's
Last edited by Leonidas; March 18th, 2008 at 02:49 PM.
Fair enough Leonidas, but keep in mind this crisis is about liquidity as much as anything...that building in Mid-town is not exactly a liquid asset that will shore up investor confidence...
That price was negotiated to keep the bank afloat...if the company goes into bankruptcy, they might simply sell that building to pay off debts and as such, investors wouldn't see any of that money.
It should mean that I don't have to listen to a bunch of blowhards argue self-servingly and self-righteously that we live in a 'free market' capitalist system where 'risk' should be rewarded by huge profits to encourage 'entrepreneurship'...blah, blah, blah.
I assume what you are trying to say here is that in reality this is true when the risk works out but when it doesn't there really isn't any risk at all because investors get bailed out. For big investors it's a "win/not lose" situation funded by Uncle Sam. If that's not what you mean then I'm not quite sure I understand your statement.
For capitalism to work you must have that downside otherwise the govt ends up bailing out big time investors who took these risks....to the determent of all. It's funny some complain that the poor is a huge burden to the govt but if the above iis true who really is the burden? It certainly isn't Peon Joe.
I assume what you are trying to say here is that in reality this is true when the risk works out but when it doesn't there really isn't any risk at all because investors get bailed out. For big investors it's a "win/not lose" situation funded by Uncle Sam. If that's not what you mean then I'm not quite sure I understand your statement.
For capitalism to work you must have that downside otherwise the govt ends up bailing out big time investors who took these risks....to the determent of all. It's funny some complain that the poor is a huge burden to the govt but if the above iis true who really is the burden? It certainly isn't Peon Joe.
jom
Yep, that's what I'm saying.
It's risky as hell to play at 'small capitalism' but people who make a living off of investment speculation have little risk. Boards of directors pay CEOs ridiculous amounts of money to make the riskiest and most profitable investments in a lightly regulated atmosphere, then when the **** hits the fan the Fed or the Federal government comes in to do a bailout.
The imperative that investment corporations maximize profits that is written into corporate bye laws, mixed with the huge overpayments to managers at the top for their work combine to create an inherently unstable and overspeculative atmosphere that threatens small investors and the stability of the financial system. Investment banks need more strict federal inspection and regulation and executives need to have their compenstion packages monitored.
The Bank Bailouts 
DRice
