JPMorgan, Fed come to rescue of Bear Stearns

JPMorgan, Fed come to rescue of Bear Stearns

www.msnbc.msn.com

Bear Stearns, with backing from the Fed, will provide secured funding to Bear Stearns for an initial period of 28 days. Officials did not say how much money JP Morgan Chase was pumping into its rival. Bear Stearns said in a statement that it is working with JPMorgan Chase to find permanent strategic alternatives to alleviate their cash problems

Top executives from both companies were considering the outright sale of Bear Stearns to JPMorgan, according to a person familiar with the talks who was cited by The Associated Press.

“The Federal Reserve is monitoring market developments closely and will continue to provide liquidity as necessary to promote the orderly functioning of the financial system,” the central bank said in a statement.

(visit the link for the full news article)

It's happening people the banks are starting to fail. It's going to be like the Great Depression 21st century edition.

www.msnbc.msn.com
(visit the link for the full news article)

I hope people take the time to read the article i posted above and the one below because you'll see how ugly this is about to get.

Caution: Crumbling Wall Street Earnings Ahead

Sorry for the short post but I just feel the need to shout...

NORTHERN ROCK..................................................

sorry. But I hope you get my drift...

UK ATS'ers will, I think.

Here's a little history on NorthernRock
NorthernRock

And if I remember the news correctly from back when this bank was borrowing money they ended up having a run on the banks and people were in lines a block long trying to get there money out.

[edit on 14-3-2008 by whoreallyknows]

Got to admit that I don't know much about the US banking system, but would the Fed take over an institution to prevent more damage in the financial sector of the US?

It does seem a little deja-vu to me.

Can anyone elighten me on this and the implications for the US financial industry?

I find a lot of these issues mind boggling. Huge sums of "virtual" money being pumped into a system already bleeding even larger sums of virtual money into some vast black hole.
The money doesn't even exist in any tangible form, it's only a data string in a virtual world. The whole financial system, for the most part, is composed of money betting on what other money will do, not anything that actually exists in the real world like actual goods or services. It's farcical that it has even been allowed to develop into the monster that it has become.

What's not so funny is that, when it starts getting stinky, it's the ordinary man and woman on the street, working hard and paying taxes, that gets shafted and expected to bail the system out. Those who created the mess still sit pretty in their mansions living off the spoils spirited away in offshore accounts found by clever lawyers.

reply to post by whoreallyknows


Here's a hoot of a quote from BS's Ceo, via Bloomberg:

Bear Stearns acted in response to ``market rumors'' of a liquidity crisis, Chief Executive Officer Alan Schwartz said in a separate statement. He said earlier this week that the company's ``liquidity cushion'' was sufficient to weather the credit-market contraction. Traders have been reluctant to engage in long-term transactions with Bear Stearns as the counterparty, the Wall Street Journal reported yesterday.

``We have tried to confront and dispel these rumors and parse fact from fiction,'' Schwartz said in the New York-based company's statement today. ``Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated.''

Translation: "Smart-ass Wall Street 'Market chatter' has caused us all these problems... Oh, and btw, looks like we just went bankrupt yesterday."

And more-sterotinin...

The Fed isn't taking over BS, they're funneling a huge credit line through JPMorgan, which isn't very exposed to the sub-prime collapse, to bail them out. JPM will doubtless get a big hunk of BS or even take it over (with the Fed's blessing).

Thanks for that.

It's just that I remember hearing originally that the Bank of England were only helping Northern Rock out on a temporary basis...

Look what happened there.

Anyway, things are going to very messy for a lot of people, very soon.

The shatter is causing them to fall? excuse me!!!!!! They have lie about their loses expectation for months to keep their investors from running away and now they blaming the rumors?

They were in more trouble that they wanted people to know and guess what the truth will set you free.

You can hide you can lie but eventually the truth will set you free.

Some of these articles crack me up, they all talk about this like you couldn't see this coming. It was as obvious as a six legged dog! I don't know much about the stock market but I can tell you one thing, I don't right checks on my account when i don't have the money in that account. And that is basicly want the fed/stockmarket/banks have done. The are rubber checking.

By the way if you tried what they are doing you'd go to jail. If you took a check from one bank account you have and cash it knowingly at another bank you have an account at, and then try to go back an forth before they bank finds out there is actually no money thats called floating checks and you go to JAIL for that. So why can they do it with billions if not trillions of dollars that are snatched out of thin air.

stocks tumble

NEW YORK - Stocks tumbled Friday as a plan to alleviate a liquidity crisis at Bear Stearns Cos. touched off concerns about the severity of credit troubles. Each of the major indexes lost more than 2 percent; the Dow Jones industrial average gave up about 300 points.

Forget talk of soft landings. Ignore those who say that the Federal Reserve is in control of events. Take with a pinch of salt suggestions that the problems at Bear Stearns are a one-off.

The rescue package orchestrated for America's fifth-biggest investment bank makes it abundantly clear that this is now a different sort of market and a different sort of crisis. It is no longer hyperbole to state that the US is facing the most serious threat to its financial system since the Depression of the 1930s.

www.guardian.co.uk

reply to post by whoreallyknows


It's far far worse than that, believe me. They do all that, but on margin--a dime on the dollar (which btw is what it'll be worth when this all shakes out--if we're lucky).

That's what makes this all so catastrophic when the markets go steeply bearish--it's a cascade effect.

What is so telling here is that BS has been the most aggressive of the major Wall Street gamblers um, investment banks, and came to prominence in the endless bubble years of Greenspan. They don't do bear markets, name notwithstanding. They think low risk is for wimps and they're built for a rising market and this will kill them.

They'll end up a division of JPM if they're lucky. After all they're the first to fall; they have massive exposure and that Fed infusion is like giving a plasma infusion to a warm corpse.

i recall on the market watch channel, the CEO of BearSterns on Wednesday said that they had $8billion in ready cash, and had lines of credit to sustain all redemptions for the next year....


just like all the talking heads that promote the market on TV,
claiming the 'worst is over', and the big finance houses saying
there's only a future 'trickle' of bad paper out there - the system is intact...

get real... they are lying their faces off -> so there ain't a massive revolt that should show itself as a devestating collapse of the faith-&-trust in both the US treasury and the manipulated markets.

The 'collapse' is unfolding, it's just that we collectively refuse to acknowledge it...


rampant, unrestrained capitalism, is what happened

Udio you are too nice and such a gentleman, you forgot corruption corruption of the most vile and dirty this nation has seen and while we are picking the pieces this corrupted CEOs that knew exactly what was going on will be sipping pinacoladas in the Cayman Islands and enjoying the life in the Nertherlands.

Crooks.

Did Bear Stern try to bail out the markets back in the collapse last January?

The troubles at Bear Stearns' hedge funds stemmed from borrowing $10 of investment for every $1 of equity. The managers could not sell in time and the effect of this imbedded leverage triggered a domino-like implosion in a thin market - a margin call for Wall Street. Leverage works both ways. Today, Wall Street's biggest firms are holding all sorts of credit instruments that are either impaired, difficult to value or worth a fraction of what they are on the books. Despite a cash infusion by Bear Stearns, the fifth largest player on Wall Street, unwinding the hedge funds wiped out the available capital and the funds were forced to close, triggering today's collapse.

www.safehaven.com...

So this mess of buying out and bailing out within this major American financial investment banks has been going on and on to keep the nation oblivious of the real state of their own affairs.


[edit on 14-3-2008 by marg6043]

KABOOM!!

That is what an investment bank failing sounds like. Just yesterday, S&P released something sayind either the worst or most of the credit crisis is over. The CEO of Bear was on CNBC couple of days ago saying"All is well". Bear is like 3rd largest of the Investment Banks?

Incidentaly problems at one of Bear's hedgefunds are what got this current crises going (or rather the problems there were the first symptom)back last summer.

This is what the FED and the Street have been trying to avoid since August. Will Bear be the only one to fall? I honestly thought that some large regional and smaller national banks (like WaMu specifically)would go down before Bear Sterns.

Good to see St. Udio comenting on this. I'm of the opinion that things are finally getting interesting. There are some incredibly interesting details to this story that I may get into in a later post.

reply to post by gottago

They'll end up a division of JPM if they're lucky. After all they're the first to fall; they have massive exposure and that Fed infusion is like giving a plasma infusion to a warm corpse.

Well said, but I would add that copulating with a dead corpse may just spread the disease to JPM. They have to take that toxic waste onto their books if they absorb BS. It will take more and more fictitious 'money' to offset the disease. Hyperinflation will be worse than the disease.

Secure a food source, starving sucks!

reply to post by jefwane


BS is the fifth largest actually--or was.

Edit to add:

"I'm of the opinion that things are finally getting interesting."

You know that old saying, "your curse is to live in interesting times."

And I don't think JPM is going into this out of altruism or desperation; reports are that their exposure to sub-primes is low, and they're probably going to get the parts of BS they want at firesale prices for being the Fed's beard and cleaning up the mess and calming the markets. It's doubtless a very good deal for them, great PR, and even better insurance.



[edit on 14-3-2008 by gottago]

Originally posted by HimWhoHathAnEar

Secure a food source, starving sucks!

Hey I agree that is why I have been eating on nuts and berries getting ready to regress to gathering mode to be able to survive.

reply to post by gottago


I'm not so sure JPM is clean. I did a quick search and found this connection to OTC Derivates, the weapons of mass destruction that stand at $516 Trillion Globally.

The launch of JPMorgan CommanD was announced in 2005, making it the industry's first full-service collateral management solution for OTC derivatives.

www.jpmorgan.com...

I think self preservation is the motive here.