Fed’s Forced Marriage of Bear Stearns and J.P. Morgan

[DeSwiss]

The Fed’s Forced Marriage of Bear Stearns and J.P. Morgan


Talking Points Memo
By Dean Baker - March 17, 2008, 9:07AM

The news that J.P. Morgan bought investment house giant Bear Stearns for just $236 million, or $2 a share, sent tremors through financial markets around the world today. This is company whose stock was worth almost one hundred times as much a year ago. Its building alone is valued at close to $1 billion, which suggests that all the other assets of this 85 year-old investment bank had a negative value – Bear Stearns liabilities exceed its assets.

Further confirming this view is the fact that the Fed apparently had to make guarantees to J.P. Morgan of $30 billion in order to get the bank to take Bear Stearns even at this price. That suggests the bank had a lot of real garbage on its books. The markets are right to be worried. Of course with the $8 trillion housing bubble in full meltdown, there will undoubtedly be much more bad news for the banks in the months ahead.

One person who does not have to worry is James Cayne, the recently departed chief executive of Bear Stearns. According to the New York Times, he walked with $232 million in compensation over the period from 1993 to 2006. This is just another example of how the global economy rewards extraordinary talent.

The official line is that the Fed had to get involved and make the guarantees in order to keep the markets in order. This is not clear. It is not easy to accept Fed pronouncements these days. After all, just last year Chairman Bernanke was telling us that the problems in the subprime market were likely to be contained. It is time that the Fed comes clean with both an honest assessment of the severity of the problem and increased transparency in its behind the scenes deals with the big banks.

There is something a bit obscene about billions of taxpayer dollars going to the country's richest people, when average workers can't afford health care for their kids.

http://tpmcafe.talkingpointsmemo.com/2008/03/17/the_feds_forced_marriage_of_be/">LINK

- The recently departed CEO got $232 million in "compensation." Damn, I hadn't realized how hard one has to work to trash a major worldwide corporation and drive it into the dust. Of course since we're now picking up the BS tab (under the circumstances, with very appropriate initials), that means we're the ones paying his compensation since its no longer in their bank accounts to cover their losses.

But our "other welfare laws" -- you know, the ones for those living in poverty, they require applicants undergo background checks, and no one with a prior drug conviction, even simple possession of marijuana can get into public housing. And if you get welfare you must agree to sign-on for job-training or some workfare program even if the job pays almost nothing after your daycare bills, food and other luxuries, and is 20, 30, or 50 miles from where you live. And you have to stand in the rain at a bus stop to get there. And at the end of a couple of years, if you're not standing on your own, that's tough, you get cut off.

And we'll not soon forget that Bush vetoed a bill that would pump up revenes to the SCHIP program by $6 billion over five years, which provides healthcare support for children so that their families don't end up having to file for bankruptcy because "its too close to being national health insurance." You know the S word. And yet they drop $30 billion on JPMorgan like it was just an appetizer, all the while knowing full well that these bankers totally ignored the standards for sound investing and with a myriad of http://www.latimes.com/business/la-fi-subprime17mar17,0,782997.story">in-house watchdogs hoisting up red flags the whole time which they duly ignored. But these people get "compensated."

Its during times like these that I'm reminded of the words of George Bernard Shaw: "Democracy is a device that ensures we shall be governed no better than we deserve."
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DeSwiss


http://atheisttoolbox.com/">The Atheist Toolbox

[peace13]

1. It takes a village to float a corporation. n/t

[DeSwiss]

5. I wish I had said that!

[high density]

2. The CEO of Bear Stearns is a liar

On Friday's conference call, he was saying that "rumors and innuendo" were hurting the company and said the rumors were false. Now over the weekend we have this "merger" defined where it requires a $30 billion guarantee to make it work. So in reality the rumors were true and the company's only option was a "merger" like this or bankruptcy.

Conference call info: http://blogs.wsj.com/marketbeat/2008/03/14/the-bear-stearns-conference-call/

[DeSwiss]

6. Those lies....

...were intended to short-circuit a run on the bank. And it looks like it worked too.

[kentuck]

3. This is the bottom line reality.

"There is something a bit obscene about billions of taxpayer dollars going to the country's richest people, when average workers can't afford health care for their kids."

[DeSwiss]

7. Puts it all into perspective....

...doesn't it? A few months ago Bush was crabbing about "national health insurance" and vetoing SCHIP, and now no one even blinks when they drop billions on the rich for their stupidity and greed.

In all my years of watching such nightmares, I've come to the conclusion that I don't believe that Americans will ever wake up....

[Tandalayo_Scheisskopf]

4. Irony.

Cayne's golden 'chute was only $US4Mill less than the sale price of BearStearns.

Of course, that little fact seems to be lost on a lot of people.

[DeSwiss]

8. Hell...

...I posted this sucker and even I missed it!

- Thanks for pointing that out....