Taxpayers Bail Out Bear Stearns; JP Morgan Buys for $2/Share Discount

[marmar]

from AlterNet's PEEK:



Taxpayers Bail Out Bear Stearns; JP Morgan Buys for $2/Share Discount

Posted by Richard Blair, The All Spin Zone at 5:19 AM on March 17, 2008.

In the past 72 hours, the ultimate financial scam has been perpetrated on the American public.




A couple of months back, I wrote the following:

The unprecedented wealth transfer from poor and middle income families to the uber rich is nearly complete. The folks at the bottom of the GOP-led financial pyramid scheme are nearly bled dry, and the pyramid is about to collapse. To sustain itself a little longer, the folks at the top of the pyramid will have to start an Amway-style ritual of financial cannibalism amongst themselves. I think that (to an extent) this is exactly what we're seeing in the stock markets and big financial houses as the true meltdown begins...

On Friday, it was announced that JP Morgan Chase Bank was acting as an intermediary to bail out the financial investment bank Bear Stearns, and essentially funneled billions of dollars from the U.S. Federal Reserve (read: you and me) to those who had entrusted their investment fortunes to Bear Sterns.

I don't even know where to start on this one. How about here?

So the only possible justification for such Fed action is to engineer an orderly rather than a disorderly shutdown of this institution. But unfortunately the Fed is behaving as if Bear Stearns is illiquid but solvent. That is delusional and the official sector support of an otherwise insolvent institution will end up - like many other recent Fed actions - being paid for by the US tax-payer...

On Friday, Bear Stearns stock closed at $30 / share, down nearly 50% from the prior day.

Today, J.P. Morgan Chase agreed to buy Bear Stearns for $2 / share. You read that right.

$2 / share.

But almost as importantly (riffing on the link above), it was also announced that the Federal Reserve will now extend their "lender of last resort" protection not just to banks, but to investment houses. So, the next time a Bear Sterns (or Merrill Lynch) gets into trouble because of bad investments, the U.S. Federal Reserve will bail them out. Or more correctly, their well-heeled institutional investors.

I freely admit I know very little about the inner workings of the banking and investment industries. But even a financial neophyte like me can understand that the Fed appears to be engaging in a totally knee jerk reaction to a liquidity crisis of a single, poorly risk-managed company.

This is getting really scary. I can't imagine that the markets will react well to this when they open on Monday.


http://www.alternet.org/blogs/peek/79892/

[zbdent]

1. Wait ... wasn't that the billions of dollars that the Republicans said

we couldn't afford over 10 years to make sure kids have minimal health coverage?

[marmar]

2. Who cares about kids?!? We've got unscrupulous execs to save!

n/t

[jpak]

3. They MUST have their golden parachutes

They must!!!!111 They MUST!!!111

:puke:

[davepc]

9. if the entire banking system fails then EVERYBODY eats it

The Fed is trying to steer a soft landing instead of a hard crash.

[screembloodymurder]

4. Let me get this straight.

JP Morgan gets Bear for $2/share. The Fed (meaning us) stand behind the loans and get squat. The Bear shareholders get $2 for a company worth $70 a few days ago and are supposed to bend over and swallow hard. The President signed off on this deal?

[Zynx]

5. Given the potential alternative to the financial system, I support this.

I think it's tragic that shareholders got screwed, but Bear Stearns collapsing could have led to a systemic failure. That would have hurt all of us.

[NashVegas]

6. It's Not Just Shareholders Getting Screwed. It's Taxpayers

This money isn't coming back.

[OmmmSweetOmmm]

7. Donning my tinfoil hat here. The Federal Reserve was created as a direct result of the 1907 Panic.

IMHO, no one has been behind as much plundering of our treasury as the Fed. JP Morgan and John D. Rockefeller (Chase Manhattan Bank), were directly involved in the creation of the Federal Reserve.

Most sources say that JP Morgan came to the rescue in the wake of the Panic of 1907. Then you have the movie, Zeitgest The Movie, that claims that JP Morgan was actually behind the rumors that started the Panic of 1907. I checked the list of sources for that section of the video and so far, I can't read them online. http://www.zeitgeistmovie.com/sources.htm

So here we are, 101 years later, and JP Morgan/Chase, is directly involved with this new Panic.Deja vu all over again?

I realize that this post of mine might be a bit disjointed right now as it is more of a hunch but I think that there is much more here than meets the eye.

:tinfoilhat:

[Atman]

8. PRINT MORE MONEY!

What did we bail them out with? There isn't a penny left in the treasury to fix a pothole on the interstate anymore, Georgie is STILL spending like a spoiled drunken frat boy, and supposedly we cannot afford to provide health care for our citizens. But we can subsidize a fire-sale takeover bid for the tycoons.

This country is soooooooooooooo fucked up.

.

[zbdent]

10. China's going to foreclose on the U.S., and George W. Bush, Dick Cheney, Halliburton,

and the rest of the Repukes are going to strip the country of all the valuable things and become citizens of Switzerland with all their numbered bank accounts ... suddenly backing the "privacy" of private citizens from spying on their bank accounts ...

[ThomWV]

11. This morning it was selling for $1.84 a share.