Morgan, to purchase Bear Stearn's assets Monday, after issues with liquidity surfaced. Many reporters were asking questions about possible preferential treatment to financial institutions over the borrower, although Paulson was correct that if you asked the shareholders of Bear Stearn, they would not consider this a bail-out or preferential treatment.
First and foremost, why was such a massive government bailout required, versus letting Bear go into bankruptcy?
Second, why was the Fed so involved - was it that critical? Those are only the opening questions. The remaining list of questions goes on and on.
For example, how many other financial institutions may have to be bailed out? How many other investment banks and prime brokers are overburdened with subprime and other mortgage Bear stearns bailout debt problems?
What will the Fed do with them? Is this just the tip of the iceberg? The conspiracy theorists are going crazy with the Fed bailout of Bear Stearns, and why not? A massive government-backed bailout of a major US investment bank by one of the largest US money center banks - J.
What juicier story could the conspiracy buffs ever hope for? Rumors and speculation continue to mount. As you might expect, Congress responded by getting its mitts onto the latest Bear Stearns fiasco. The Senate Banking Committee initiated an official investigation of the Bear Stearns bailout and took testimony last week, including the testimony of J.
Interestingly, the stock and bond markets had little response to the latest developments with J. Morgan and Bear Stearns.
And why should they have, actually? So, what does this mean for average investors like us?
Some say not much. I'll try to give you some answers below. In addition to the Bear Stearns deal, the government passed legislation last week intended to bail out American homeowners who are at risk of defaulting on their home mortgages.
Never mind that many should have never been granted these mortgages in the first place. But now, the libs in government feel compelled to bail them out, along with many homebuilders and others in the housing sector it's an election year after all.
So much to try and cover in just a few pages.
I'll do my best. Despite strong revenues, the subprime mortgage meltdown made a disastrous year for Bear Stearns, one of the nation's largest underwriters of mortgage bonds and subprime mortgage securities in particular. Beginning last summer with the housing slowdown, Bear Stearns has stood as the prime example of how Wall Street's big bets on securities based on risky home loans went south.
Many believe it was the collapse in June last year of two internal Bear Stearns hedge funds which were heavily invested in mortgage securities that kicked off the full-fledged market panic in subprime debt and related securities in the last half of Bear Stearns lost so much capital that in the fall of it formed a partnership with China's Citic Securities, in which the two firms swapped shares.
Rumors began to circulate that Bear was in trouble. In January of this year, Bear's longtime leader, James E. Nevertheless, the rumors intensified.
By early March, lenders were cancelling credit lines and clients were frantically pulling assets out of the company.
Rumors of liquidity woes had become reality as the bank run drove Bear to the verge of bankruptcy by Friday, March As the crisis unfolded, Bear executives contacted J. Morgan-Chase about a possible takeover. But in general, the deal went as follows.Most of the 5, Orange County borrowers who lost a home to foreclosure in the past year should be hopping mad.
|September 24, 2009||He sidestepped questions about whether other firms are on shaky ground and the possibility of additional interventions of this kind.|
|What Caused the Meltdown: A Financial Crisis FAQ | Reason Foundation||When mentioning the Credit Crunch, few still could not believe the speed and severity with which Bear Stearns, one of the world largest investment banks, collapsed.|
|The Bear Stearns/JPMorgan Chase Bailout - Capital Research Center||Fed in hot water over secret bailouts The Fed bailed out Bear Stearns without authorization from Congress or informing the public. The Fed also took on billions of dollars worth of AIG securities, also before the official government-sanctioned bailout.|
|Bear Stearns : definition of Bear Stearns and synonyms of Bear Stearns (English)||Bear Stearns engaged in a broad range of activities, including investment banking, securities and derivatives trading and clearing, brokerage services, and originating and securitizing commercial and residential mortgage loans.|
|Get journalism built for thinkers like you.||More from the banking and financial services sector Market discipline is one of the three pillars of the Basel 2 accord and perhaps the most important.|
Same goes for the half million or so Americans in the same sad plight. You received. Bailing out Bear Stearns J.P.
Morgan bought its collapsing rival Bear Stearns after the Federal Reserve intervened. The Fed took several unusual moves, including approving the purchase over the.
Mar 14, · Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world. A Timeline of Bear Stearns' Downfall "I'm going to be the last CEO of Bear Stearns" While it's hard to know exactly what Jimmy Cayne, Bear's CEO until January of , meant by those words, it. Mar 14, · Bear Stearns' Big Bailout JPMorgan Chase and the federal government team up on a bailout of Bear Stearns, a last-ditch move to save the investment bank Matthew Goldstein.
Ten years ago when Bear Stearns crashed, the Fed decided to bail out first, ask questions later. It was a mistake that set a bad precedent. Thou canst not say I did it.
Never shake thy gory locks at me. Macbeth, Act 3, (Macbeth to Banquo’s ghost) This week (March 14, a Friday in ) marks the. Sep 13, · The Bear Stearns bailout convinced everybody that Lehman would be treated no differently as a Wall Street Journal article from June explains: The ouster of two top executives at Lehman Brothers Holdings Inc., including the person responsible for keeping the company’s books, sent the bank’s share price tumbling to a new six.
Is JP Morgan Chase buying a pig in a poke? Or is its purchase of beleaguered investment firm Bear Stearns the steal of the century?
We won't know for a while, but I'd guess in a year or two JP Morgan's chief executive officer Jamie Dimon will look like Willie Sutton-metaphorically, of course. Mar 24, · The Federal Reserve Bank of New York said it would provide $29 billion in term financing to facilitate J.P.
Morgan Chase & Co.'s acquisition of Bear Stearns and will form a privately managed.