Bear Stearns - more of the same for the average Joe

[desrat]

Ever since this "deal" was announced something has smelled foul about this. I have friends at Bear and JPM but as an American I was just offended by this deal on its face. It took a while for me to realize why my first glance was the right one. A lot of research later and I realized why my first impression was the correct one. As a marble among some really sharp tacks I will let a well known and respected person explain it better:

John Hussman of Hussman Funds says the following:

Bear Stearns is trading at $6 instead of $2 because unelected bureaucrats went beyond their legal mandates, delivered a windfall to a single private company at public expense, entered agreements that violate the the public trust, and created a situation where even if the bureaucratic malfeasance stands, the shareholders of Bear Stearns will either reject the deal or be deprived of their right to determine the fate of the company they own. Very simply, Bear Stearns is still in play. Still, when all is said and done, my own impression is that the ultimate value of the stock will not be $2, but exactly zero.

In effect, the Federal Reserve decided last week to overstep its legal boundaries – going beyond providing liquidity to the banking system and attempting to ensure the solvency of a non-bank entity. Specifically, the Fed agreed to provide a $30 billion “non-recourse loan” to J.P. Morgan, secured only by the worst tranche of Bear Stearns' mortgage debt. But the bank – J.P. Morgan – was in no financial trouble. Instead, it was effectively offered a subsidy by the Fed at public expense. Rick Santelli of CNBC is exactly right. If this is how the U.S. government is going to operate in a democratic, free-market society, “we might as well put a hammer and sickle on the flag.”

One person has decided to take some action to try and stand up for the Average American. Karl Denninger runs a well read blog along with an active traders forum. He has done things like this in the past, but this time he has really taken lead. Read this Market Ticker and see if it meets your views and sensibilities. If so take some action!

If you are concerned by what you read do some more research on the forums he has and some past Tickers and see what may lay in store for the Average Joe. Stop laying down for the pigmen and take some action to try and help yourself, or at least your kids/grandkids. They will be the ones who will be paying for our complacency!

 

[desrat]

As I typed this JPM has announced they will take the first Billion in risk so now the Fed will only offer them a $29B put. Gee.

In the discussion on CNBS, Jim "helping the little people make money" Cramer said, "THE AVERAGE AMERICAN DOESN'T KNOW JACK" in response to a question about this deal affecting the average American. Wow, the man of the people just insulted them. Keep calling him and let him lead you to his pigmen friends for a good shearing Sheeple.

 

[desrat]

These subsidies are a travesty. Goldman Sachs, Lehman Brothers, and Morgan Stanley are extraordinarily profitable companies. They have also been the drivers of the worst trends in the American economy over the past generation, pushing excessive CEO pay that has spread like a cancer throughout corporate America, even reaching into universities and non-profits. Additionally, they have pedaled the shareholder value paradigm, that has pushed companies to emphasise short-term gain over long-term investment, and contributed to ripping up America's social contract. Meanwhile, their business model has promoted speculation that is behind repeated asset and commodity price bubbles

Of course we can't get real reporting from the American press. We need a foreigner to tell it like it is.

http://commentisfree.guardian.co.uk/thomas_palley/2008/03/crony_capitalism.html

 

[desrat]

Where are the cops? Where is the outrage? When will the sheeple wake up to what is going on at the expense of their 401ks and descendant's future?

http://www.nytimes.com/2008/03/25/b...ef=slogin&oref=slogin&oref=slogin&oref=slogin

But the night that Bear signed the original bid, the Fed opened what’s known as the discount window to companies like Goldman Sachs and Lehman Brothers — oh, yes, and to Bear, too. Except that the Fed didn’t tell Bear that it planned to open the window when it was signing its deal with JPMorgan.

Had Bear known it might have access to the discount window — a crucial source of liquidity — it might have been able to hold out for a couple more days or at least had enough leverage to seek a higher bid. But the Fed clearly preferred the original bid.

Inside Bear, jaws dropped at what many considered a broad deception by the Fed. Alan D. Schwartz, Bear’s chief executive, was furious, as was the board and its team of advisers. Several JPMorgan executives even offered their apologies about the way the deal “went down.”

the Fed’s fingerprints were all over the new pact. In an action almost unprecedented in takeover history, JPMorgan bought 39.5 percent of Bear on the spot to ensure that it would have close to a majority of the votes to approve the deal. That agreement completely disregards New York Stock Exchange’s rules that prevent anyone from buying more than 20 percent of company without a shareholder vote. Other parts of the new agreement either stretch the rules or disregard years of precedent in Delaware, where both banks are incorporated. Of course, all this rule-bending was done with the tacit, if not outright, approval of the federal government.

If you don't get off your ass and do something now, feel free to stay on it when the shit hits the fan. Those who tried to make a difference beforehand won't want to hear it. If you want to see what we have ahead of us look at Japan for the last 20 yrs. Only it will be worse here as the Japanese had one of the best savings rates in the world when the storm hit. US, leveraged to the hilt.