Archive for the ‘Bear Stearns’ Category

Wall Street, Congressional Smart Guys Pretty Stupid

October 12, 2008

“If these guys are our best and brightest, then it is about time we rethink what constitutes wisdom….”

By Victor Davis Hanson
The Washington Times
October 12, 2008

Until the last few weeks, the financial panic was still mostly far away on Wall Street. But not now.

Car loans, mortgages and college financing are suddenly harder to come by. Millions are stuck in houses not worth what is owed on them. Cash-strapped consumers are cutting back. The economy slows. Jobs disappear. Who wants to open quarterly 401(k) statements only to learn everything they put away in retirement accounts the last two or three years is gone?

House Financial Services Committee Chairman, Rep. Barney Frank, ...
House Financial Services Committee Chairman, Rep. Barney Frank, D-Mass., talks with reporters after meeting with fellow Democrats about the financial bailout package Thursday, Oct. 2, 2008 in Washington.(AP Photo/Evan Vucci)

There is plenty of blame to go around. Greedy Wall Street speculators took mega-bonuses even when they knew their leveraged companies were tottering – and someone else would pick up the tab. Crooked or stupid politicians allowed Fannie Mae and Freddie Mac to squander billions, as they raked in campaign donations and crowed about their politically correct support for millions of shaky – and now mostly defaulting – buyers.

The new national gospel became charge now/pay later and speculate, rather than put something away in case of a downturn. To provide more goodies we hadn’t earned, politicians ignored soaring annual budget deficits and staggering national debt and kept spending.

But amid the gloom, there are some valuable….

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http://www.washingtontimes.com/news/2008/oct
/12/correction-wall-street-101/

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Report: JPMorgan could up Bear offer

March 24, 2008

NEW YORK – JPMorgan Chase & Co. was discussing a deal that would increase fivefold its offer for Bear Stearns Cos. to $10 a share, The New York Times reported Monday.

The talks Sunday were an attempt to satisfy Bear Stearns stockholders upset over JPMorgan’s offer of $2 a share for the struggling investment bank, the newspaper said on its Web site, citing people involved in the negotiations.

The original price for Bear Stearns was part of a deal struck last week at the urging of the Federal Reserve and Treasury Department.

The Fed, which would need to approve any change in the agreement, was balking at the new price, the Times said. Such opposition could postpone the new agreement or derail it entirely.

In an attempt to speed majority shareholder approval, Bears board was trying to authorize the sale of 39.5 percent of the firm to JPMorgan, the Times said. State law in Delaware, where the companies are incorporated, allows a company to sell up to 40 percent without shareholder approval.

A spokeswoman for JPMorgan declined to comment Sunday night, the Times said. A Bear Stearns representative could not be reached.

A spokesman for the Federal Reserve would not comment on the central banks involvement in the negotiations, but denied it had directed the original sale price, the newspaper said.

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JPMorgan Negotiating for Bear Stearns?

The New York Times
March 24, 2008
JPMorgan Chase was in talks on Sunday night for a deal that would quintuple its offer for Bear Stearns, the beleaguered investment bank, in an effort to pacify angry Bear shareholders, according to people involved in the negotiations.

The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal, struck only a week ago at the behest of the Federal Reserve and Treasury Department.

Under the terms being discussed, JPMorgan would pay $10 a share in stock for Bear, up from its initial offer of $2 a share — a figure that represented a mere one-fifteenth of Bear’s going market price.

The Fed, which must approve any new deal, was balking at the new offer price on Sunday night after several days of frantic, secret negotiations, these people said. As a result, it was still possible the renegotiated deal might be postponed or collapse entirely, said these people, who were granted anonymity because of their confidentiality agreements.

If the Fed were to reject the new proposal, it could set off a furor among shareholders of both firms that the government was preventing them from making a fair deal.

 Read the rest:
http://www.nytimes.com/2008/03/24/business/24deal.html?_r=1&hp&oref=slogin

US ponders: How deep is economic abyss?

March 23, 2008
By RACHEL BECK and ERIN McCLAM, Associated Press

NEW YORK – For months, Americans have been subjected to a sort of economic water torture — a maddening drip of bad news about jobs, gas prices, sagging home values, creeping inflation, the slouching dollar and a stock market in bumpy descent.
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Then came Bear Stearns. One of the five largest U.S. investment banks nearly collapsed in a single day before the government propped it up by backing emergency loans and a rival stepped in to buy it for a paltry $2 per share.

To the drumbeat of signs that seemed to foretell a traditional recession, this added a nightmarish specter — an old-style run on the bank, customers clamoring to pull their cash, a stately Wall Street firm brought to its knees.

The combination has forced the economy to the forefront of the national conversation in a way it has not been since the go-go 1990s, and for entirely opposite reasons.

As economists and Wall Street types grope for historical perspective — which is another way of saying a road map out of this mess — Americans are nervously wondering about retirement savings, interest rates, jobs that had seemed safe.

They are surveying the economic landscape and asking: Just how bad is it?

They are peering over the edge and asking: How far down?

And the scariest part of all? No one can say for sure.

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Even before the crippling of Bear Stearns Cos., the U.S. economy was acting as a slowly tightening vise — an interconnected web of factors combining to squeeze Americans from all sides.

Take Jaci Rae of Salinas, Calif. She runs a company, Luco Sport, that sells golf bags and accessories. The merchandise is made with foam, which is based on petroleum, so record oil prices have taken a heavy toll.

On the other end, her clients are feeling the pinch, too, and cutting back. Sales to retail clients are an eighth of what they were a year ago. So Rae had to cut five of her 20 employees loose.

Now the company isn’t buying products as far in advance. With gas prices running high, she waits for shipping companies to pick up products from her headquarters instead of having an employee drop them off.

She is nickel-and-diming expenses at home, too. She eats in every night, has stopped going on road trips to visit her family, dropped her satellite dish and canceled her monthly Blockbuster movie rental.

“I want to make sure I have enough money to feed my family,” Rae says.

Signs of the pinch are showing up everywhere:

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http://news.yahoo.com/s/ap/20080323/ap_on_bi_
ge/economy_on_the_edge;_ylt=AiN_Mt
jJ4EffzPJF5GvE4cms0NUE

Fire Sale of Bear Stearns Bear Sparks Rout, Bush Tries to Calm

March 17, 2008
By Jack Reerink 

NEW YORK (Reuters) – A fire sale of Bear Stearns Cos Inc (BSC.N) stunned Wall Street and pummeled global financial stocks on Monday on fears that few banks are safe from deepening market turmoil.

A U.S. two dollar bill is taped to the revolving door leading ...
A U.S. two dollar bill is taped to the revolving door leading to the Bear Stearns global headquarters in New York March 17, 2008.(Kristina Cooke/Reuters)

Trying to assuage worries that the credit crisis is spinning out of control, President George W. Bush said the United States was “on top of the situation,” but the sell-off intensified in the early afternoon.

The U.S. Federal Reserve geared up for a deep cut in interest rates on Tuesday to blow money into the fragile financial system — the latest in a series of rate cuts that has brought down borrowing costs by 2-1/4 percentage points and hammered the U.S. dollar to record lows.

Staff at Bear Stearns‘ Manhattan headquarters were welcomed to work on Monday by a two-dollar bill stuck to the revolving doors — a spoof on the bargain-basement price of $2 per share that JPMorgan Chase (JPM.N) is paying for the firm. A hopeful Coldwell Banker real estate agent was hawking cheap apartments to employees who saw the value of their stock options go up in smoke.

The combination of Bear Stearns’ bailout and the Fed’s offer on Sunday to extend direct lending to securities firms for the first time since the Great Depression highlighted just how hard the credit crisis has hit Wall Street.

And it scared market players worldwide….

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http://news.yahoo.com/s/nm/20080317/bs_nm/bearstearns_fed_dc;_ylt=
Agm1uUl9fJe7eEc0zjCowb.s0NUE

Asian stocks tumble on Bear Stearns news

March 17, 2008

NOTE:   Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million. Just a few days ago Bear Stearns was valued at $30.00 a share.

Just one year ago, Bear Stearns was valued at $172.00 per share.

A man leaves a Bear Stearns' office in Hong Kong's Central ...
A man leaves a Bear Stearns’ office in Hong Kong’s Central district March 17, 2008. JPMorgan Chase & Co said on Sunday it would buy stricken rival Bear Stearns for just $2 a share in an all-stock deal that values the U.S. investment bank at the centre of the credit crisis at about $236 million.REUTERS/Victor Fraile (CHINA) 
 
A Financial analyst told Peace and Freedom on Monday that the Bear Stearns building in New York City is worth more than $240 million.

The sale on a Sunday was almost unprecedented.

A few hours later the Federal reserve approved a cut in its lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created another lending facility for big investment banks to secure short-term loans. In an example of the urgency of the situation, the Fed said the new lending facility will be available to big Wall Street firms on Monday.
Federal Reserve Chairman Ben Bernanke testifies before the House ... 
Federal Reserve Chairman Ben Bernanke testifies before the House Financial Services Committee about the latest measures to heal the U.S. economy, on Capitol Hill in Washington in this file photo from Wednesday, Feb. 27, 2008.
(AP Photo/J. Scott Applewhite)

This bold action Sunday evening is meant to provide cash to financially squeezed Wall Street investment houses, a fresh effort to prevent a spreading credit crisis from sinking the U.S. economy.
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By KELLY OLSEN, AP Business Writer

SEOUL, South Korea – Asian stocks plunged and the dollar sank Monday after JPMorgan Chase said it would buy troubled U.S. investment bank Bear Stearns, signaling to investors the depths of the credit crisis.
Bear Stearns headquarters

Bear Stearns headquarters

Oil prices hit a record in Asian trading and U.S. stock index futures were down sharply, suggesting Wall Street would open lower Monday after sinking Friday.

JPMorgan said Sunday it would acquire Bear Stearns for $236.2 million — or $2 a share — in a deal that represents a stunning collapse for one of the world’s largest and most venerable investment banks.

The buyout was aimed at averting a bankruptcy and a spreading crisis of confidence in the global financial system sparked by defaults in the U.S. subprime mortgage market.

But to Asian investors the move suggested that the credit woes are far from over and fanned worries that other big American banks are facing serious troubles.

“There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted,” said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.

“Just buying an investment bank does not solve the problem,” he said. “Markets are prodding (the U.S. government) to inject public funds.”

News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul. Both fell sharply before paring some losses in afternoon trading.

Japan‘s benchmark 225 index sank 3.7 percent to close at 11,787.51 points, its lowest in more than 2 1/2 years. In Seoul, the Korea Stock Price Index fell 1.6 percent to 1,574.44 after sagging as much as 3.9 percent.

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world_markets;_ylt=AuhKf.RjS0u30g
ZbUPzJYBOs0NUE

By John E. Carey
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This bold action Sunday evening is meant to provide cash to financially squeezed Wall Street investment houses, a fresh effort to prevent a spreading credit crisis from sinking the U.S. economy.

But the news sent the dollar tumbling to a record low against the euro as investors worried that there would be more casualties in the widening U.S. financial crisis.

And Asian stock markets reacted with concern and dismay.

A trader stands on the floor of the Philippine Stock Exchange which closed down 3.88 percent on Monday.
Photo by Darren Whiteside (Reuters).

Asian stocks plunged and the dollar sank Monday in early trading.
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Japan’s benchmark 225 index sank 3.7 percent to close at 11,787.51 points, its lowest in more than 2 1/2 years. In Seoul, the Korea Stock Price Index fell 1.6 percent to 1,574.44 after sagging as much as 3.9 percent.
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And there is a ripple effect across Asia.
US dollar and pound sterling banknotes. The pound has posted ... 

Take Vietnam for example.  The communist state has had the second strongest economy, after China, for the last two years.  But in December alone, inflation in Vietnam was at 50%.

This past week Vietnam announced a drastic draw down in exports.
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A year ago, Vietnam’s exports were rising at a rate of 29.2 percent.  Economic analysts said this year’s rise would exceed 32%.  But because of the weaker U.S. dollar and the slower world-wide economy, Vietnam’s exports in the first quarter would only grow 23.7 percent from a year earlier

In China, manufacturing and exports were way off for the first quarter.  But China said much of that was due to the staggering snowfall and cold this past winter.

“There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted,” said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.

“Just buying an investment bank does not solve the problem,” he said. “Markets are prodding (the U.S. government) to inject public funds.”
Bear Stearns's headquarters overlooks the flag for neighboring ... 
Bear Stearns’s headquarters overlooks the flag for neighboring JP Morgan Chase headquarters in New York on Friday, March 14, 2008. The Federal Reserve invoked a rarely used Depression-era procedure Friday to bolster troubled Bear Stearns Cos. and said it will provide even more help to combat a serious credit crisis. JPMorgan Chase is providing an undisclosed amount of secured funding to Bear for 28 days, backstopped by the Federal Reserve Bank of New York.
(AP Photo/Mark Lennihan)

There is, of course, good news.  There always is.

If you sell your gold jewelry right now you’ll make a record profit.  Reuters reports that gold prices shot up more than 3 percent Monday to fresh record highs as investors stepped up buying of the yellow metal, whose luster has increased due to the dollar’s weakness and deepening U.S. financial woes.

“This morning’s moves by the Fed clearly tell how serious the situation is in the United States. Gold is drawing a lot of safe-haven demand as you can’t buy stocks or currencies because of this volatility,” said Shuji Sugata, manager at Mitsubishi Corp Futures and Securities Ltd. Mr. Sugata wa quoted by Reuters.

Gold’s attraction as an alternative investment has helped boost the precious metal’s price by more than 20 percent this year alone, as it hit successive record highs along the way.

Gold was up 32% in 2007.
Gold bars are displayed at the headquarters of Mitsubishi Materials ...

Gold bars are displayed at the headquarters of Mitsubishi Materials Corporation in Tokyo, January 9, 2008. Gold prices shot up more than 3 percent on Monday to hit fresh record highs as investors stepped up buying of the yellow metal, whose luster has increased due to the dollar’s weakness and deepening U.S. financial trouble.(Toru Hanai/Reuters)

Treasury chief defends Fed intervention

March 16, 2008

By JEANNINE AVERSA, AP Economics Writer 

WASHINGTON – Treasury Secretary Henry Paulson on Sunday defended the Federal Reserve‘s decision to help rescue Bear Stearns Cos., the teetering Wall Street investment bank. He sidestepped questions about whether other firms are on shaky ground and the possibility of addtional interventions of this kind.

Treasury Secretary Henry Paulson gestures during a news conference ...
Treasury Secretary Henry Paulson gestures during a news conference at the National Press Club in Washington, Thursday March 13, 2008.
(AP Photo/Jose Luis Magana)

At the same time, Paulson sought to send a calming message that the Bush administration is on top of the turbulent situation. “The government is prepared to do what it takes” to ease turmoil in the financial system and minimize any damage to the national economy, Paulson said during a series of broadcast interviews. The Fed’s intervention “was not a difficult decision. It was the right decision.”

The Fed, using a Depression-era procedure, raced to Bear Stearns‘ aid Friday along with JPMorgan Chase & Co. Bear Stearns had made a fortune in mortgage-backed securities but faced a possible collapse after those investments soured. Wall Street nose-dived as fears spread about whether other big firms were in jeopardy.

“When you go through a period like this,” Paulson said, “policymakers need to balance various consequences.”

 Read the rest:
http://news.yahoo.com/s/ap/20080316/ap_on_
go_ca_st_pe/paulson_credit_crisis;_ylt=A
kaY8CquJckuHd.g6Vu4M0Ss0NUE