The Fed Bails Out Bear Stearns

a1bion · Post by **a1bion** » Mon Mar 24, 2008 3:55 pm

Bear shareholders were pissed at that two dollar bid. JP Morgan raised it today to 10 bucks.

TTBHG · Post by **TTBHG** » Mon Mar 24, 2008 4:11 pm

How much do they raise it next time? I don't think anyone is gonna let this deal slide thru.

a1bion · Post by **a1bion** » Mon Mar 24, 2008 7:06 pm

I don't think it gets raised again. I saw one article which seemed to indicate the director of Bear, Jim Cayne, is happy to get $10/share and he's got enough shares that JP Morgan should be able to take control if he's cool with the deal.

I saw another analysis that basically said that JP is paying just what Bear's building cost and getting the brokerage thrown in free! LOL

a1bion · Post by **a1bion** » Tue Apr 08, 2008 8:13 pm

Paul Volcker smacked Bernanke right in the pie hole today.

April 8 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.

``The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices,'' Volcker said in a speech to the Economic Club of New York.

Fed Chairman Ben S. Bernanke last month agreed to lend against Bear Stearns securities, paving the way for JPMorgan Chase & Co. to buy its Wall Street rival. Bernanke, who worked with Treasury Secretary Henry Paulson to broker the bailout, last week defended the move as necessary to prevent ``severe'' damage to financial markets.

Volcker, the Fed chairman from 1979 to 1987, had implicit criticism for U.S. regulators and market participants who allowed ``excesses of subprime mortgages'' to spread into ``the mother of all crises.'' The Fed's Bear Stearns loan was unusual, he said.

``What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return,'' he said.

http://www.bloomberg.com/apps/news?pid= ... DZWKWhz21c

TheTodd · Post by **TheTodd** » Wed Apr 09, 2008 2:32 am

It certainly is a VERY questionable move by the Fed. We really had no way to go but down in talent after Greenspan.

a1bion · Post by **a1bion** » Wed Apr 09, 2008 7:24 am

Greenspan is proof that Ayn Rand's fanboys are tools.

TheTodd · Post by **TheTodd** » Wed Apr 09, 2008 5:36 pm

I like some of Rand's stuff now so watch it friend-o. As much of a tool he may have been, he was a pretty damn good economist.

a1bion · Post by **a1bion** » Wed Apr 09, 2008 7:38 pm

I don't know about him as an economist, but I think he sucked as Fed chair. Greenspan took real interest rates negative at the beginning of this decade, which set off the current credit bubble we're dealing with. Then in 2004, he started recommending that more people should take out adjustable rate mortgages at a time when the Fed was about to start raising interest rates. He's since admitted that he didn't understand how ARMs worked at the time he made that recommendation.

You could throw in his intervention to save the hedge fund, Long Term Capital Management, and that pretty much sums up Greeny for me.