Author Topic: Which Bear Stearns Story Do You Think is the Truth?  (Read 1408 times)

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Offline boomerkel

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Which Bear Stearns Story Do You Think is the Truth?
« on: April 01, 2008, 07:15:32 am »

There are Two (2) Stories in this Poll / Post ...  Which one do you believe is the Truth?

Paulson's Fairy Tale





Paulson defends Bear Stearns bailout

The Associated Press
Monday, March 17, 2008

WASHINGTON: The U.S. treasury secretary, Henry Paulson, defended on Sunday the Federal Reserve's decision to help rescue Bear Stearns, the teetering Wall Street investment bank.

He sidestepped questions about whether other financial firms were on shaky ground and the possibility of additional interventions of this kind, saying, "I'm convinced that they're going to come out of this situation very strong."

Paulson also sought to send a calming message that the administration of President George W. Bush 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 U.S. 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 procedure from the Depression era of the 1930s, raced to the aid of Bear Stearns on Friday alongside JPMorgan Chase. Bear Stearns had made a fortune in mortgage-backed securities but faced a possible collapse after those investments soured. Wall Street plunged as fears spread about whether other big firms were in jeopardy.

"When you go through a period like this," Paulson said, "policy makers need to balance various consequences."

Some critics contend that the Fed's move was akin to a government bailout - something the Bush administration has repeatedly said it is against.

"Well, every situation is different. We have to respond to the circumstances we're facing today," Paulson said. "And my concern is to minimize the impact on the broader economy as we work our way through this situation and, again, the stability of our financial situation."

The financial system, he said, is "more fragile than we would like right now."

Senator Charles Schumer, a New York Democrat, accused Bush of not doing enough.

"The president is, indeed, behaving like Herbert Hoover," Schumer said. "We're in the most serious economic problem we've been in a very long time, much worse than 2001. The president's hands-off attitude is reminiscent of Herbert Hoover in 1929, in 1930."

Bush planned to meet Monday with his advisory panel on financial markets, whose members include Ben Bernanke, the chairman of the Federal Reserve, and Paulson. ..............  Copyright © 2008 The International Herald Tribune


Bob O'Brien the "Easter Bunny"


Bob O'Brien's Sanity Check Blog         
Posted by:   bobo    3/15/2008 11:12 PM


UPDATE 3/16: BEAR TO BE BOUGHT BY JP MORGAN FOR COUPLE BUCKS PER SHARE, FURTHER VALIDATING THE SPECULATION THAT JP MORGAN WANTS BEAR OUT OF SCRUTINY BY ANYONE ELSE. THEY KNOW WHAT THEIR EXPOSURE IS, AND THEY BASICALLY ARE UNWILLING TO PAY MORE THAN A TOKEN TO OWN BEAR - AND BEAR IS HAPPY TO GET THAT TOKEN. HOW MUCH SCARIER DOES THIS NEED TO GET?

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So, the government has stepped in and orchestrated a bailout of a for-profit broker/investment bank that is not a member of the Fed, nor a bank - and yet the Fed is now acting as though they are. This sort of brings us full circle to where we were several years ago, when I predicted that the dangerous risks and illegal behavior of the Wall Street predators gets passed off to the taxpayer, at a level that makes the S&L crisis look like jaywalking.

And here we are.

But what is significant is not so much that, but that JP Morgan is in the mix. Why is that significant? Because JP Morgan does a lot of clearing for Bear, which means that the massive NSS exposure Bear has would then likely take down JP Morgan, in a heartbeat, as it became obvious that Morgan's assets were also dwarfed by off balance sheet liabilities (if I'm right, which I believe I am). Because if BS went onto the auction block, then potential buyers would get a good look at all its assets and liabilities, which would then give visibility to JP Morgan's exposure, which I'm guessing is considerable.

You think a $500 billion or so drop in asset value is bad? Try what I'm guessing could be multiples of that number in off balance sheet liabilities arising from massive counterfeiting of securities, spanning decades. How would you like that to come out? Nope, best to bring in the government, circle the wagons, and prop up a for-profit player who got caught with vapor assets.

In the real world, if you take outsized risks, you get slammed when you lose. On Wall Street, you pocket billions in bonuses every year, even as you're aware that your paper is worthless crap, and then call in the cavalry when you get caught - because you are too important to fail.

This is the first of the events I predicted, as to how this plays out. The cover-up continues, any discussion of the actual crimes gets sidetracked by arguments about the importance of stability in the financial markets. and the next 3 generations get to pay for the cover-up.

Here's an idea that will never be discussed in the mainstream press: If you and I have to work for the next decades to pay for the Bears of the world, how about now that we are sponsoring them, we get a look at how our newly-subsidized wunderkind have run their business, specifically, what are the level of fails, ex clearing fails, repo-agreement fails, etc.?  Mary pointed out correctly in the last blogs' comments that we still were never told what the size of the Refco fails were - that just sort of got swept under the rug. Hey, if you can kill all the companies shorted, problem solved, right? But now that we are footing the bill for Bear's mismanagement or larceny, how about we get some scrutiny of what it is we're sponsoring?

That will never happen. JP Morgan can't afford it. The political system can't afford it. The financial system can't afford it. Byrne and I have been talking systemic meltdown arising out of this sort of arrogant trampling of the 1934 Act for years, and here we start seeing it, in slow motion.

You think lying about what your paper is worth sucks? How about carrying a liability that is so large that there isn't enough money in the system to cover all the counterfeited stock?

Which is why the country will now have its standard of living reduced by a significant amount, to protect the criminals who operate the system. That's how it played in 1929 - we got a paper tiger regulator created to appease the outrage of a country, run by one of the biggest crooks of the era as his personal retribution machine, and the rest of the population got the dust bowl. History has a way of repeating.

Kiss any value of the dollar goodbye as the printing presses go into maximum overdrive. Kiss confidence in the markets goodbye. Kiss the housing values of the nation goodbye. Start scouting good locations for soup kitchens and public works projects, because that's where this is headed now that the country pays the chit for the worst offenders, just as it did in the S&L crisis. Not surprisingly, many of the guys now running the system made fortunes stuffing junk down the S&L throats, and trading on inside info, lo, 20 years or so ago. So they know the trick - when the jig is up, foist it off on the country, keep the bonuses, and buy assets for pennies on the dollar.

Why is JP Morgan bailing out Bear with the Fed? Because the cancer Bear has is rotting Morgan, and it can't afford the size of the decay to be known, or tomorrow morning, there won't be any market. ............. Copyright ©2008 Bob O'Brien


"I believe that banking institutions are more dangerous to our liberties than standing armies." ... Thomas Jefferson

Offline MikiQuick123

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Re: Which Bear Stearns Story Do You Think is the Truth?
« Reply #1 on: April 03, 2008, 05:43:21 pm »
Quote
Kiss any value of the dollar goodbye as the printing presses go into maximum overdrive. Kiss confidence in the markets goodbye. Kiss the housing values of the nation goodbye. Start scouting good locations for soup kitchens and public works projects, because that's where this is headed now that the country pays the chit for the worst offenders, just as it did in the S&L crisis. Not surprisingly, many of the guys now running the system made fortunes stuffing junk down the S&L throats, and trading on inside info, lo, 20 years or so ago. So they know the trick - when the jig is up, foist it off on the country, keep the bonuses, and buy assets for pennies on the dollar.

Why is JP Morgan bailing out Bear with the Fed? Because the cancer Bear has is rotting Morgan, and it can't afford the size of the decay to be known, or tomorrow morning, there won't be any market.

You are right Boomerkel, JP Morgan only did this to cover their own a$$.
If this doesn't wake people up to the financial ruin that will encompass us all, I don't know what will besides soup lines. Thanks for the post. Bob O'Brien tells it like it is.
"All that is necessary for the triumph of evil is for good men to do nothing"-Edmund Burke

Offline rick reuben

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Re: Which Bear Stearns Story Do You Think is the Truth?
« Reply #2 on: April 03, 2008, 06:29:30 pm »
Bernanke just increased the torque pushing on the next potential 'chaotic unwinding', if it's true that Morgan bought BS to keep BS's books from being explored in bankruptcy proceedings ( which, like O'Brien describes, pulls back the curtains on Morgan's exposure ). Bernanke just built a bigger lead domino. They're robbing us blind by sucking every drop out of the fiat shit, while they buy time to arrange their own escapes.

Offline MikiQuick123

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Re: Which Bear Stearns Story Do You Think is the Truth?
« Reply #3 on: April 03, 2008, 07:46:37 pm »
When the SHTF it's the small investors who will take a hit. The big boys will waltz right past those open windows straight to their limos and private jets without so much as a backward glance.
"All that is necessary for the triumph of evil is for good men to do nothing"-Edmund Burke