A Falsehood Bigger Than The Fed
Some housing bubble news from Wall Street and Washington. Bloomberg, “JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. for $240 million, about 90 percent less than its value last week, after a run on the company ended 85 years of independence for Wall Street’s fifth-largest securities firm. The Federal Reserve is providing financial backing to JPMorgan, the second-biggest U.S. bank, and also cut the rate on direct loans to banks in its first emergency weekend action in almost three decades to stave off a broader market panic.”
“JPMorgan Chief Executive Officer Jamie Dimon bought Bear Stearns, once the biggest underwriter of U.S. mortgage bonds, for less than the value of its real estate after clients, alarmed by speculation about a cash shortage, withdrew $17 billion in two days.”
The New York Times. “Investors remain fearful that a panic in the credit markets, which threw Bear Stearns to the brink of bankruptcy and forced a sale to JPMorgan Chase, could spread to other big brokerage firms with extensive exposure to toxic mortgage-backed securities.”
“‘The problem is bigger than the Fed,’ said Meredith A. Whitney, an Oppenheimer financial services analyst. ‘Trillions of dollars of securities were underwritten on the false assumption house prices could never go down on a national basis. That falsehood has put the entire financial system in a tailspin.’”
“Federal Reserve Chairman Ben S. Bernanke may be facing something worse than a loss of personal credibility on Wall Street and in Washington: waning faith in the ability of the institution he leads to turn around the economy and the financial markets anytime soon.”
“‘The Fed has been playing the equivalent of Whac-A-Mole as financial turmoil keeps cropping up in new and unexpected places,’ says former Fed Vice Chairman Alan Blinder, referring to the arcade game where players try to hammer down plastic critters that randomly pop out of holes. ‘Yet many of the problems facing us are beyond its reach.’”
“Home buyers are unlikely to put down offers on houses that they think will lose value — no matter how much the Fed does to lower mortgage costs. Banks with mounting loan losses will shy away from lending to borrowers they think might go bust — no matter how much money the Fed pumps into the financial system.”
“Falling asset prices erode borrowers’ net worth and make lenders even more reluctant to give them money. Countrywide Financial Corp., the biggest U.S. mortgage lender, made no subprime loans last month, down from $2.6 billion in February 2007.”
“Investors have become gloomier about the outlook for house prices since the start of the year, according to trading in futures based on the 10-city S&P/Case-Shiller price index. Traders see prices tracked by the index falling 13-1/2 percent by November, more than double the drop foreseen in early January.”
“‘It’s not showing any signs of letting up,’ economist Robert Shiller, one of the creators of the index, told Bloomberg Television Feb. 27. ‘If anything, it’s accelerating downwards.’”
From Reuters. “A lot of people lost a lot of money: Entrepreneur Joseph Lewis, a reclusive Englishman who made a fortune trading currencies, bought a stake of about 10 percent in Bear and stands to lose around $1 billion.”
“The jittery mood means even well positioned banks may be reluctant to take advantage of acquisition opportunities, bankers and analysts said.”
“‘I think M&A is too difficult now,’ a London banker said. ‘This is about catching a falling chainsaw. It’s not just about cutting yourself if you get it wrong, it’s about losing a limb.’”
“Lewis, a former currencies trader who was born in an apartment above a pub in London’s East End, declined to comment through a spokesman. The loss is almost half his $2.5 billion fortune, as estimated by Forbes magazine in its 2007 survey.”
“Mutual funds run by investment bank Morgan Stanley were the third-largest Bear Stearns holder with a 5.4 percent stake and may have lost about $546 million since Dec. 31. Bear’s fifth-largest shareholder, Baltimore-based Legg Mason Capital Management, a unit of Legg Mason Inc. run by Bill Miller, may be down $493 million.”
“‘This was done in the market’s best interests,’ said David Hendler, an analyst at a financial-research firm in New York. ‘Unfortunately Bear Stearns shareholders are at the short end of the stick and they only got this token payment.’”
“James Cayne, Bear’s former CEO and fourth-largest holder with a 4.9 percent stake, saw the value of his holding drop by $504 million.”
“Warren Spector, the former bond chief who calculated complex securities trades by hand…shared a passion for bridge with Bear’s CEO, Jimmy Cayne. Both men lost their jobs after bets on subprime mortgage bonds soured. They were at a bridge tournament in Detroit last week, as Alan Schwartz, the CEO for two months, fought a run on Bear’s cash brought on by widening subprime losses.”
“‘The people who did this are Jimmy Cayne and Warren Spector,’ said Richard Bove, an analyst at Punk, Ziegel & Co.”
“Last month, Cayne paid $27.5 million for two adjacent 14th-floor condominiums at New York’s Plaza Hotel overlooking Central Park, according to city property records. The new digs may not insulate him from scrutiny as regulators try to determine who’s at fault for the expanding credit crunch, Bove said.”
“‘It will be interesting to see what kind of iron doors Cayne puts on his new apartment,’ he said.”
The Associated Press. “Bond Insurer FGIC Corp., which is owned by mortgage insurer PMI Group Inc., said Monday it lost nearly $2 billion in the fourth quarter and continues to seek a reorganization of its insurance operations and to raise capital to shore up its financial position.”
“The loss resulted primarily from writing down the value of securities guaranteed by FGIC that are backed by subprime and second-lien mortgages, the company said. The company said it stopped writing new financial guaranty business for now in order to hold onto capital.”
The LA Daily News. “It’s become clear that financial shenanigans are partly to blame for bogging down the mortgage industry. Interthinx, an Agoura Hills-based company that provides risk-mitigation and regulatory-compliance tools for the financial-services industry, says the hole is pretty deep.”
“Company analysts found that in the last half of 2007, about 42,000 mortgage applications for property valued at $11 billion misrepresented the borrowers’ earned income.”
“‘For the first time, the industry is getting a real-time look at the scope of mortgage fraud, and these numbers are staggering,’ said a statement by Kevin Coop, president of Interthinx, which has about 1,400 clients nationwide, including 15 of the top-20 mortgage lenders and three of the five largest financial institutions.”
“Interthinx VP Jeff Moyer said the analysis was generated using an ‘income alert,’ a software program that warns when a borrower submits multiple applications in which his or her reported income jumps by at least 15 percent. Moyer said he was surprised by the number of alerts the program flagged. ‘It should not be that high.’”
“The problem spiked as the market boiled over in the early 2000s and then exploded starting in the latter part of 2005. The company found that 24.4 percent of home loans examined in the third quarter of 2007 were deemed to have a high risk of fraud.”
“‘What you are hearing is that there was a significant amount of (loan application) misrepresentations,’ said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. ‘The joke was, if you had a pulse you could get a home loan.’”
The LA Times. “Freelance financial watchdogs who examined the paperwork on sub-prime home loans being sold to Wall Street had an inside view of the boom in easy-money lending this decade.”
“The reviewers say they raised plenty of red flags about flaws so serious that mortgages should have been rejected outright…but the problems were glossed over, ignored or stricken from reports.”
“In interviews with The Times, eight experienced loan reviewers said that as marginal lending increased, quantity took precedence over quality. Squads of 10 to 15 veteran loan checkers gave way, they said, to packs of 40 to 50 mostly novice reviewers posted at or near sub-prime factories such as now-defunct Orange County lenders New Century Financial Corp. and Ameriquest Mortgage Co.”
“Loan reviewer Jana Lujan recalled showing a file to a supervisor in 2004, during a check of sub-prime mortgages made by a Brea bank that regulators later cited for unsound lending. A title report showed a tax lien on the property.”
“‘I said we needed evidence it had been paid off and released,’ to ensure against foreclosure, Lujan said. ‘And he said: ‘Just go ahead. Assume it’s being taken care of.’”
“The biggest problems, the reviewers said, were appraisals that looked inflated and ‘liar’s loans.’ ‘You can’t tell me a Kmart or a Wal-Mart or a Target floor worker is making $5,000 a month, or a house cleaner is making $10,000,’ said former loan reviewer Irma Aninger of Palm Desert, a 40-year financial services industry veteran.”
“Aninger, who did work for Clayton and Bohan, said she tried repeatedly to have such loans marked as unacceptable but was overruled by supervisors, who were known as project leads. ‘The lead would say, ‘You can’t do that. You can’t call these people liars,’ Aninger said.”
“One such supervisor was Clayton’s Ed Peek. He denied discouraging the rejection of ’stated income’ loans. ‘Many, many, many stated income loans were rejected,’ he said, but the loan buyers often bought the rejected mortgages anyway.”
“From his perch, Peek said, he could see the deterioration of overall standards. ‘I had been looking at sub-prime mortgages since the beginning,’ he said. ‘When it started, you couldn’t get a sub-prime loan for over 80%’ of a property’s value.”
“‘But the guidelines loosen, and the investors would still buy,’ Peek said. ‘They loosen up some more, and investors still buy,’ until highly risky loans for 100% of a home’s value were pushed through.”
“‘Everyone knew this was a bubble that couldn’t last,’ he said. ‘We all could see this coming.’”
The Financial Times. “‘The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War,’ former US Federal Reserve chairman Alan Greenspan said in a Financial Times commentary published on Monday.”
“‘Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed under stress,’ said Greenspan, who some have criticised for contributing at least in part to the current crisis by being too lax on monetary policy whilst head of the Fed. ‘The crisis will leave many casualties.’”
“‘It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities,’ he said.”
“‘In the current crisis, as in past crises, we can learn much, and policy in the future will be informed by these lessons. But we cannot hope to anticipate the specifics of future crises with any degree of confidence,’ he said.”
“‘Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulations not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.’”
‘market flexibility and open competition’
This guy is starting to piss me off. The above only work if the participants bear the risk! The idea that the Fed would save the markets time and again is one of the reasons why lenders progressively dove deeper into crazy loans. We need a public flogging, I think.
And how’s this for the uh-ohh of the day:
‘The company found that 24.4 percent of home loans examined in the third quarter of 2007 were deemed to have a high risk of fraud’
Still probably understating the problem by AT LEAST 1/2 (if we are including lying about income). Perhaps the 25% number would be accurate for the previous years, but by 2007, I would be shocked if 50% of the loans weren’t fraudulent..
“And how’s this for the uh-ohh of the day:
‘The company found that 24.4 percent of home loans examined in the third quarter of 2007 were deemed to have a high risk of fraud’ “
The 24% is understated because that is only the ones that are obvious on the face - the ones where there are two applications and the second one is higher than the first or the job description clearly doesn’t match the salary. The rest of the fraud is harder to catch - the ones who lied enough on the first application to get the loan or who fudged the job title as well as the salary.
And then there are fudges with downpayments’ funding sources, adding authorized users to increase credit scores…
And the year was 2007. Imagine 2005 or 2006 vintage.
The irony to all this is that those in charge wanted to be able to ignore the rules while still applying them to the little guy: they’d rob us for billions, while tracking every dime we earn or spend to make sure we’re “playing fair.” Now, the commoners figure out the game to some level and also ignore the rules, so the Big Boys get to suffer (at least a bit) from all this as well. In the end, we’re all going down in flames, but watching the common-folk follow the moral examples set by their leaders is amusing.
“‘Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulations not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.’”
Market Flexibility and Open Competition? Why not just let Bear Stearns fail and you will see the market be flexible as it develerages.
Then again, the stockholders of Bear Stearns sure lost. Where is Joe Lewis???
IMO, BS did fail. Read the Reuters article with the Lewis stuff. Sounds like Morgan got a pretty good deal.
OH JPM got a great deal. BSC shareholders have to approve the deal. Do they have a choice? Will JPM raise their offer? Really JPM holds all the cards IMO and BSC is a failure. It is not the only failure that will happen. Rumor is that Lehman is also in trouble. Someone on CNBC said that if they did get into trouble you might see something similar with a Goldman Sachs or other investment bank trying to get involved.
Most of the others looking at this deal over the weekend wanted nothing to do with it at any price. Estimate ranges from a negative $7B net worth to $7B positive. I think they overpaid.
Is it a good deal? That will take a long time to find out.
A while back there were estimates floating around for the billions of level 3 assets (unable to provide a value because they trade so infrequently) for all of the big firms. So I’m not sure how anyone could get a handle on the value of BS. The numbers were mindboggling, at least to my puny brain.
As an example Prudentbear.com has them at
Lehman with $22 billion in Level 3 assets, 100% of capital, Bear Stearns with $20 billion, 155% of capital, and J P Morgan Chase with about $60 billion, 50% of capital. However those figures are almost certainly low; the border between Level 2 and Level 3 is a fuzzy one and it is unquestionably in the interest of banks to classify as many of their assets as possible as Level 2, where analysts won’t worry about them, rather than Level 3, where analyst concern is likely.
Isn’t it impossible to accurately value Bear Stearns with property values crashing daily?
“Isn’t it impossible to accurately value Bear Stearns with property values crashing daily?” Once the value went negative, the need for accuracy fell out the window.
Wonder what the Fed will do if/when JPMorgan fails…
I’ve never seen ‘ol hank paulson speak before today but right now in a live telecast on msnbc he is stuttering & stammering like crazy. He really looks shaken up in his demeanor.
also, he reminds me of daddy warbucks. I keep looking behind him for annie & her dog.
(watching lehman fall by the minute on the live ticker)
JPMorgan pretty much runs the Fed. This has been true since 1913.
If JPMorgan fails, the Fed itself fails. You can guess what happens next.
JPM won’t fail.
The following is a little tidbit from this month’s “hat trick letter” by Jim Willie at http://www.goldenjackass.com
“Intrepid financial forensic analyst Rob Kirby in his February article entitled “Numbers That Do Not Add Up” (click here), pointed out a gross disparity. Citigroup admitted huge losses recently, stated as linked to credit derivatives, enough to put forth the question of their insolvency. As of the September 2007 statement from the Office of the Comptroller of the Currency, they owned $3.037 trillion in notional value of credit derivatives. Yet JPMorgan owns $7.778 trillion in the same toxic credit derivatives that have rendered huge damage everywhere, crippling Citigroup, which announced a 4Q2007 loss of $9.83 billion. JPMorgan announced some phony censored earnings for the same quarter, protected from the reality of similar damage by the Fascist Team in power. The Citigroup stock has fallen badly, but the JPM stock rolls along. Remember, JPMorgan is the bottomless garbage can.”
Here is the link to the JPM derivative article by Rob kirby, pretty interesting
http://www.financialsense.com/fsu/editorials/kirby/2008/0215.html
alright so just where was Hank Paulson educated? I’ve seen better public speakers from the local sheriff’s dept talking about a jaywalker. this guy is prior head of Goldy Sachs & now a fed muckety muck? no spit n polish, no class AT ALL - what an embarrassment! Paulson acts like some stupid bouncer just off the street: he just stalked off at the end of the press conference; no social grace at all.
is he actually some arrogant azzhole all the time?! is that what our country has come to?!
Just for argument’s sake, let’s say that JPM does “fail”. I don’t think the Fed could blatantly bail them out. The best option for the Fed may be to pull a “Northern Rock” and nationalize JPM. Then, 2 years from now, they could give it back to the same thieves that run it now after sticking taxpayers with the billions in losses that are coming.
“JPM won’t fail.”
JP Morgan is assuming the riskiest portion of Bear Stearns. Whether they fail or just flounder is years to determine. They will be putting themselves into a very risky position. And to do this deal they had to pledge their entire book.
The only other bank that was stupid enough to do something like this was Citigroup and look where that bank is going.
“I’ve never seen ‘ol hank paulson speak before today but right now in a live telecast on msnbc he is stuttering & stammering like crazy. He really looks shaken up in his demeanor.”
I’ve seen him plenty of times, but today he was different. Forget unpolished, he was defensive and quite honestly, he looked scared.
To my eye both Paulson & Bernanke have looked afraid time & again since August 2007. Not a good sign.
The Large Lady has not yet sung; If stockholders of BS are smart, they will quickly force a vote on this rip off. A no vote will force a bankruptcy and, if memory serves me, any funds paid above and beyond normal salary within 90 days prior to the bkrpcy will have to be returned. What? …about 2-5 billion in bonuses that those sleaze balls doled out to themselves?
No time to lose. They dished that loot out about 6 weeks ago. If I lost a billion or two, you bet Id be pounding for a vote! Could this be just an act…. a gift from Ben to the boys to cement their bonuses and in May say “Oh well, we tried to help, but, nevermind”?
Just got this in my mailbox:
The law firm of Bruce Murphy PC is investigating possible illegal conduct relating to the Bear Stearns Companies Inc. Employee Stock Ownership Plan, Profit Sharing Plan and Deferred Compensation Plan (NYSE: BSC - News).
Bruce Murphy is investigating whether certain fiduciaries of the Plans may have violated the Employee Retirement Income Security Act of 1974 (”ERISA”). The firm’s investigation relates to whether certain fiduciaries of the Plans knew or should have known that Bear Stearns was concealing its large exposure to highly risky Collateralized Debt Obligations, subprime mortgages, and other poor-quality securities, which has rendered Bear Stearns common stock and certain funds that it manages and offers as a risky investment for Plan participants.
Specifically, the firm is investigating whether Bear Stearns breached its fiduciary obligations under ERISA:
(1) by continuing to offer Bear Stearns common stock and mutual funds as an investment option for participant contributions when it was imprudent to do so; and
(2) by failing to take action to sell Bear Stearns stock and mutual funds or otherwise protect the Plans’ assets in light of the company’s risky business strategies and deteriorating financial conditions
If you have an individual account with the Bear Stearns Employee Stock Ownership Plan, the Bear Stearns Profit Sharing Plan, or the Bear Stearns Deferred Compensation Plan, you may have legal claims under ERISA. If you wish to discuss this matter or have any questions concerning your rights with regard to this matter, please contact bgm@brucemurphy.biz
The Fed’s actions show they will continue to bail out Wall St firms under the cover of keeping the markets in balance which will benefit all. I about had it when I heard that BK may have been prevented to preserve the $1 billion plus in bonuses paid to BS employees.
“The idea that the Fed would save the markets time and again is one of the reasons why lenders progressively dove deeper into crazy loans.”
Yep, moral hazard at its finest.
“We need a public flogging, I think.”
I favor public waterboarding 24×7 for a month, but that’s just me.
What I really find distasteful is that anyone poor is looked at as lazy scum, anyone without medical insurance is looked at as irresponsible scum, anyone that is conservative in spending and is a saver is looked at as unpatriotic scum, anyone that rents instead of buying is looked at as bitter scum, but these titans of business are looked at a deserving of their outrageous wealth. Some ownership society this has turned out to be - own the risk and consequences only if you are a mere mortal.
are they crazy
brilliant insights / excellent observation
Beautiful Crazy….. beautiful.
Waterboarding would be the best. It isn’t torture so we should be good to go.
“The above only work if the participants bear the risk!”
Bingo! Heads Wall Street wins, tails Main Street loses policies are anti-competitive.
of course all the talking heads on TV are mentioning the word “bottom” as often as possible to calm the village mobs. and what a surprise that all of the financial crews inthe pits, on TV, etc are trying to save their easy cushy jobs by cheerleading the whole mess.
unspoken agreement among the financial industry is simple; dont shatter the privileged glass office we all work in by starting a financial meltdown. By all means possible, do NOT break ranks & keep uttering self-serving public statements, because white collar will not stand in a blue collar soup line.
Ben said:
“The above only work if the participants bear the risk!”
Good one - for every individual - bear the risk!
Certainly some participants in the house buying frenzy in the Alt-A Bay Area (San Francisco) circa 2003-2006 were not cognizant of the risks.
When I was looking to buy early in that phase, I understood it was a bit opaque for many greedy “consumers”.
In part I say this because in many cases the appetitite for risk (”eyes bigger than their stomach”) was beyond scale - buyers didn’t always “do the math” because they had so many Wall Street engineered (voodoo) financing options and the REIC mantra about equity gains forever clouded their judgement.
If each individual took the time to independently understand the risks they were bearing… maybe we wouldn’t be here.
Well, then again, given Wall Street - perhaps not!
“‘Everyone knew this was a bubble that couldn’t last,’ he said. ‘We all could see this coming.’”
But everyone was too busy stuffing money from commisions into their pockets to take any action to stop the fraud. Now that everything has grind to a halt, the investigations have begun and most of the mortgage brokers are unemployed, they are now talking to save their own butts.
I bet a bunch of them will be talking a mile a minute in the near future as they are lined up and charged with felonies and they begin to play the blame game.
be nice if indictments finally happen but I have to ask : “why is the poster child of intentional fraud casey serin not in jail by now” !??
This is too big.
Very, very, very few will ever be prosecuted or even questioned.
Unfortunately, I agree. Many, many will walk away unscathed with huge, hideously ill-gotten, gains. It’s rotten in the worst sense of the word.
It’s been pissing a lot of us off, Ben. These bailouts shift all the risk back on the public via inflation while the assholes ride off into the sunset to do it again sometime in the near future. Wall Street, the Fed and our government SUCK.
Don’t include me in your camp. If anything, you worriers should give it a rest now. BS failed, flat on the ground and all Morgan did was buy the offices and copiers, at a fire sale. Like one poster said, much more money was destroyed over the weekend than created. That’s deflation.
What I’m aggravated about is AGs illogic. This nonsense was what got us here.
I’m not worrying Ben. All my fears have already come true. This massive misuse of public funds is just another clear example of what is wrong. I do agree it is deflation of assets, but everything you need to buy (food, energy) are still soaring. It’s the collapse of the currency, which is not coincidental with the hundreds of billions the Fed is printing to stop the collapse.
AG blows. The only thing worse than that idiot is the fact millions hung on his every word while the rest of us wanted to THROW UP.
His comments about regulation are of course laughable. How anyone could warn against over regulating when the complete failure to regulate is what helped create this mess is vintage AG. He’s a moron and so are the millions that actually thought he was a genius!
‘All my fears have already come true. This massive misuse of public funds’
The Federal Reserve is private, and the US dollar hasn’t existed for decades. We have plenty of regulations, but someone must enforce them. Just in December the Fed wiped away almost all crazy loans with the stroke of a pen.
As for being afraid, go for it. The ones that stay focused and make the right moves will prosper. This is going to be the biggest transfer of wealth in our lifetimes, IMO.
“This is going to be the biggest transfer of wealth in our lifetimes, IMO.”
That is exactly the statement I’ve heard my Wall St account friend say. Word for word.
“This is going to be the biggest transfer of wealth in our lifetimes, IMO.”
From the top 1% to the top .01%?
As for the other 99%…we are screwed.
From the USA to overseas. Not just “money” wealth, but intellectual property, hard assets, patents, commodities, etc.
The Wall Street scum and governments have been sucking the lifeblood out of US manufacturing for 20-30 years, by leveraged buyouts, taking money from research and development, taxing the golden goose, etc.
Successful parasites don’t kill the host.
“This is going to be the biggest transfer of wealth in our lifetimes, IMO.”
So what is your strategy, Ben? Waiting for the right time to buy real estate while sitting on PM’s? What is the right move in your opinion?
Ben Jones: As for being afraid, go for it. The ones that stay focused and make the right moves will prosper. This is going to be the biggest transfer of wealth in our lifetimes, IMO.
Ben, I know you think there are a few nut case ‘chicken little types’ - and some of less than nut cases do post at times with a one to many bourbon in us…
But I think you consistently overlook what Gulfstream-sitter is saying. This money is going to go overseas, it isn’t going from rich to middle class like you saw in the Texas real estate busts. We enabled the world economy and we no longer ‘control’ it. A lot of the rich people are really out of touch with that. The people at the bottom are the ones who really know it - as all those low-level jobs are gone. The people at the top are too stupid to realize that their jobs are often the most ‘virtual’ and they can move even quicker!
robmypro: Shhh. Saying that our government sucks is unpatriotic. My country, right or wrong.
isnt govt and country different things?
I couldn’t disagree more.
Starting to piss you off?
Ben Jones, you are a patient and tolerant man.
(no wonder you can deal with the charachters around here)
keep up the excellent work!
Chris Dodd on CNBC pushing for a federal bailout of bad mortgages for individuals. He was bragging about all of the secret meetings he was involved with over the weekend. Big deal. Where was this idiot five years ago when he could have made a difference?
Preach it, Hobbyist!
We all need to send Chris Dodd a note thanking him for his idea to stop paying our mortgages, nothing like civil disobedience in mass to get ones attention to our outrage at this situatation.
This post has 2 priceless quotes!
“‘The Fed has been playing the equivalent of Whac-A-Mole as financial turmoil keeps cropping up in new and unexpected places,’ says former Fed Vice Chairman Alan Blinder, referring to the arcade game where players try to hammer down plastic critters that randomly pop out of holes. ‘Yet many of the problems facing us are beyond its reach.’”
This comment makes me want to go to Chuckie Cheese and play Wach-A-Mole with the financial markets on my mind! A new reality game show perhaps???
“‘I think M&A is too difficult now,’ a London banker said. ‘This is about catching a falling chainsaw. It’s not just about cutting yourself if you get it wrong, it’s about losing a limb.’”
Ouch… I think Bear Stearns was decapitated practically. Joe Lewis lost both is legs today. 2.5 Billion now worth $1.5 Billion? What about all his RE holdings in FL? What are those worth? Certainly much less. He is most likely not even a billionaire anymore. He should have stuck with currency trading and shorted the dollar. He would have made much more.
‘This is about catching a falling chainsaw.’
One of the most alarming metaphors I have ever heard.
How about ‘catch a falling crane’ for Wall Street….we know that don’t work now.
Well, OK, that is alarming, too. Especially as I walk under 5-6 cranes every morning on my way to work and there is a thirty-story crane swinging back and forth outside my window right now.
Unless you are referring to the bird. I would prefer to catch one of those instead of a chainsaw.
“‘The Fed has been playing the equivalent of Whac-A-Mole as financial turmoil keeps cropping up in new and unexpected places,’ says former Fed Vice Chairman Alan Blinder, referring to the arcade game where players try to hammer down plastic critters that randomly pop out of holes. ‘Yet many of the problems facing us are beyond its reach.’”
Appears the market is pricing in a 100 point rate cute. I’m thinking Bernanke has 2 maybe three 3 rounds left in his P shooter.
soon i will have to pay the bank interest to hold my money
Oh, you can give me your money to hold and I won’t charge you anything. Anything for you, my friend.
Contact Ben for my shipping address.Tens and twenties are fine.
Or you can trade your dollars in for foreign currency and invest that. Much lower inflation and higher capital gains.
I’m dying to hear any BS horror stories. Cayne cashing out a month ago to buy a $28M Plaza condo has to infuriate BS employees. I bet 10,000 resumes went out this morning.
Who knew investment bankers could get Enron-ed. I guess everyone forgot about what happenend to Drexel Burnham.
I may have to add Manhattan as one of the places to consider for a second home when I get back into the game (current plan is about 3 years). Sounds like the price may be right.
Not if the dollar continues to slide. NY will be repatriated by the British and Europe and Americans will rent it from them.
I’m thinking the focal point of the BSC buyout discussions centered around the execs severance packages. How much will the CEO get?
Odds are high that payout on change-in-control was already in their employment agreements. And my guess is getting-the-deal-done took all of their time on the weekend.
I stand corrected: To add insult to injury, Bear Stearns does not offer payouts, known as ‘golden parachutes,’ for executives in the event of it being taken over.
from txchick’s link down below:
http://biz.yahoo.com/rb/080317/bearstearns_mood.html
the Madison Avenue entrance, Ray Schmitz, a Realtor with Coldwell Banker, was betting that with the value of their stock options in tatters, Bear’s employees might soon be looking to trade their luxury homes for something a little easier on the budget.
“You have to go where the business is,” Schmitz said as he handed out business cards. “A lot of these people are going to lose their jobs, and most of their wealth will have been in share options. They’re soon going to be looking for a cheaper place to live.”
and keep this guy away from the windows:
In London, where Bear employs 1,500 staff in the financial district of Canary Wharf, some employees were less willing to speak, only confirming that they worked for the bank.
One Bear Stearns employee, when asked for a reaction snapped: “You must be joking. What are you, a vulture? Get a life.”
And who will be buying these overpriced houses?
One Bear Stearns employee, when asked for a reaction snapped: “You must be joking. What are you, a vulture? Get a life.”
That’s a good quote too. The vultures are picking at each other’s eyes.
I read on another blog is am that $200 Billion was to cover CEO and the other $36 was for the rest of the top of the heap. Person claimed to have inside info, but who really knows.
If that is true, and that is a serious if, and I were one of the people getting a payout, I would be scared for my life. Seriously terrified. It might be worth it to donate the entire payout to a fund to help the employees with moving expenses or supermarket gift cards or something.
I guess everyone forgot about what happenend to Drexel Burnham.
Whatever happened to toupee man?
I think he owns an island off the coast of Seattle. He barely makes the Forbes 500 these days.
Toupee man is on tv right now. David Darst.
finnmann
my wife’s employers husband works at bsc and they took a huge hit with the stock collapsing and many of his co-workers have already put their homes up for sale
i told my wife god forbid we were both out of work i would be out of nyc in a flah for a cheap locale
renting and having some cash with no debt is a good thing right now
“I’m dying to hear any BS horror stories….”
Don’t know if this is what you had in mind, but when I lived in NYC my (first) husband’s best friend worked as a trader @ Bear. Every day after work, they went to the Pink Pussycat Lounge, a strip club. This friend at Bear fell in love with one of the strippers and was convinced she loved him, too. She certainly did love him all right…until she had taken his last dollar. Then (surprise, surprise) she no longer loved him. He ended up living in the park…
so the poor guy worked with bears & lived with em too
I am always amazed at these traders.
A long time ago, on Feb 14th, one of the traders wanted to buy his mom roses. Fine, worthy sentiment and all that.
He asks me, “Will roses be horribly overpriced today?”, and I’m like, “Are you a freakin’ trader or what? If you knew that the demand for roses will vanish tomorrow, and you have a captive clientele today, what would you set the price at?”
I do not believe introspection is a skill they possess.
Can you tame the bear?
“‘I think M&A is too difficult now,’ a London banker said. ‘This is about catching a falling chainsaw. It’s not just about cutting yourself if you get it wrong, it’s about losing a limb.’”
I guess by using the “falling knife” phrase we can all be viewed as optimists, at least by some.
Joe Lewis just said that the deal for Bear Stearns at $2 is not going to happen. He said it is a “Derisory [rediculous] Offer and they will not get it” referring to JP Morgan.
If the deal does not go through, JP Morgan gets the building. Also JPM is running the show from what I hear and the deal has not even been approved! CNBC said employees were already leaving with boxes.
http://www.foxbusiness.com/markets/industries/finance/article/bear-bailout-employees-fortunes-vanish_520815_9.html
http://www.guardian.co.uk/feedarticle?id=7391831
Stunned Bear Stearns investors eye legal claims
“This is gonna go down as the biggest theft in all of financial history, said William Smith, portfolio manager of Smith Asset Management and a former Bear employee. “The $2 a share stock price is more symbolic than anything because the alternative is nothing.”
“This is one of the unfortunate stories on Wall Street. I’m a former Bear guy. I have friends over there. My friends just watched their fortunes vaporize,” Smith added.”
Wold the biggest theft be Jim Cramer saying Bear Stearns was a buy at $80 per share?
Check this out!
http://www.cnbc.com/id/23575614
Dear Jim: Should I be worried about Bear Stearns Bear Stearns Co IncBSC
4.53 -25.47 -84.9% NYSE
Quote | Chart | News | Profile
[BSC 4.53 -25.47 (-84.9%) ] in terms of liquidity and get my money out of there? –Peter
Cramer says: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”
If you see the current stock price now (which is actually listen in the question from last week along with Jim’s answer, you can see how wrong Jim was.
I can’t stand Cramer, but that’s actually a bit unfair. The question wasn’t about buying or selling their stock, but about moving what I’m guessing is a street account elsewhere.
They were sure as hell in trouble, though. He FUBAR’d that part.
“I can’t stand Cramer, but that’s actually a bit unfair. The question wasn’t about buying or selling their stock, but about moving what I’m guessing is a street account elsewhere.”
Yeah, right. You’re buying into his excuse today when pressed by Erin Burnett? The guy’s a flat out liar.
Maybe, but here’s the video, and I still don’t see a direct question about their stock…
http://www.liveleak.com/view?i=2b7_1205751955
Hell, I’d rather sit through a Teletubbies marathon than watch that guy for five minutes, at least tinky winky doesn’t have obvious pit stains, but I still don’t see him saying anything about Bear at $80 share, or $2 a share.
“They were sure as hell in trouble, though. He FUBAR’d that part.”
Speaking of which, did y’all here that it was the FUBAR bar in Manhattan that the crane fell on top of today>
Oh come on, that’s teribly unfair to the Teletubbies…
My friends just watched their fortunes vaporize,” Smith added.
The horror.
Here’s an exercise: Go to Bucks in Woodside (Silicon Valley) and ask the patrons if anyone lost a fortune in y2k.
I’ll buy you one beer for each person who didn’t.
Woodside has a serious appointment with the JT.
When I was there last (Aug 2007), one in three of the “estates” had a “discreetly” placed “For Sale” sign.
That’s hilarious…
For all the crap much of the local VC’s invested in during the late 90’s they should have lost more of their money - and still be embarrassed.
And these days, consider taking some real risk and invest in something worthwhile!
All it would take is one big shake. Woodside and Portola Valley sit on the San Andreas fault line.
Screw that!
All it takes a few big shakes on Wall St. and Portola Valley and Woodside will collapse.
Like catching a falling Crane?
“Last month, Cayne paid $27.5 million for two adjacent 14th-floor condominiums at New York’s Plaza Hotel overlooking Central Park, according to city property records. The new digs may not insulate him from scrutiny as regulators try to determine who’s at fault for the expanding credit crunch, Bove said.”
Please, if there is any justice left, let guys like this be hauled out of their lavish penthouses and bridge games and get stripped of assets to pay for their horrible, inept, clueless, yet highly paid management skills. I know I’ll be reading about all the latest “legally entitled to” Golden Parachutes soon for these ass-clowns and the prospect makes me sick.
“Last month, Cayne paid $27.5 million for two adjacent 14th-floor condominiums at new York’s Plaza Hotel …”
Time for Cayne to execute his 14th-floor option.
With two condos, anyone coming after him won’t know which one he is in…good personal security trick…also they have netting under the windows in case he ‘accidentally’ falls out.
No lawyer can provide a good Defenestration for the likes of him…
Defenestration is one of my favorite words ever. One of the really over priced condos in Rockville center (MD) is called the Fenestra - Italian for window?
Fenestration = the design and disposition of windows and other exterior openings of a building.
Defenestation one of my all time favorite words too… don’t you just love the confused worried people look if threatened with it?
What does Defenestation mean?
To throw or push someone out a window
Mr. James Cayne should have been thrown out when it was disclosed he cheated at both the bridge table and at the golf course. How can anyone trust a firm that cheats at bridge and golf?
Truly, this most be prescient. An Omen, a portent of some kind. 14th Floor?
Everyone knows there is no 13th floor, and the 13th is always labled as the 14th.
He couldn’t even see the bad side of this “investment” which is quite obvious. It appears anything on the market is AAA to him.
He should go down with his investment decisions, which were clearly “marginal” at best. Ha hahaha.
“The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War”
Why not say since the end of the Depression? Too alarming? It seems much better to relate our current situation to a time many Americans view positively rather than the preceding years which are viewed as some of the worst in our history.
Bar none, that’s the #1 reason I’ve become so enthralled in this epic story over the past few years - it is simply without precedent in the lifetimes of so many. Think of all the institutions, expectations, assumptions, beliefs, etc. that are rooted in a sixty-odd year snapshot of human history 1945-2005!
Target #1 is the expectation/belief/assumption that RE always goes up - mission accomplished - no, really!
“‘The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War,’ former US Federal Reserve chairman Alan Greenspan said.”
Dear Messrs. Greenspan and Bernanke: http://tinyurl.com/2hpuar — Most sincerely, FRB
Very clever.
“Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed under stress”
There was a risk-valuation system? Hm. See, I thought they were all but giving away loans with some plugged in rate escalation and penalty clauses that made the software say “sure, this is a good deal!” Then they packaged and sold the toxic waste as if it weren’t twisted and contorted.
And this went on for ver five years. Evaluating risk is not rocket science, bub.
http://gawker.com/368637/bear-stearns-forgets-to-update-its-web-site
Bear Stearns’ website is still boasting about awards it won in 2007 and 2006 for BearXplorer, a client side risk analytics initiative
“‘Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed”
I think Visa is going public in a few days. Is this bad timing on their part, or it is a separate issue?
If more people get the bright idea of paying their credit card balance down to zero every month, then how will Visa make money? After all, they can only ding merchants for so much.
It’s my understanding that VISA only makes money off of transaction charges. The finance charges are interest payments to whichever bank has extended the credit. (Visa, unlike say amex, does not itself extend credit to anyone.)
I thought up until now Visa makes money from the transaction charge and the banks make money on the interest & charges. I got the impression that going public meant they were taking on more risk and potential reward. But maybe I misunderstood.
Looking at Tom’s post below I think I may have got it wrong.
Terrible timing but they want to cash out badly and stick the public with what will be a horrible investment in the coming years as people stop spending with credit cards.
It’s all linked. I’m sure their method of valuing their assets will be strictly scrutinized, as will the risk of further asset devaluation.
The thing is that Visa supposedly doesn’t bare any risk because the banks hold the balances and take the risk and Visa just makes money on the simple transactions. The problem is if people can’t go use their credit cards because they are maxed out might actually end up hurting Visa and Mastercard (MA). Mastercard has doubled in about a year. It was about $40 close to 2 years ago I think and is around $200 now.
A lot of debit cards are also linked to Mastercard / Visa. I assume retail vendors pay per-transaction fees on debit card payments (or debit card payments masquerading as credit payments)? I don’t think this usage will go away. Under a hyper-inflation scenario, it would even make more sense. (Adios, Weimar Wheelbarrows.)
Americans are pretty attached to credit cards anyway. Seems like a good way for corporate America to get itself a large indentured servant class — those with some income, but who unwisely pay off interest or partial balances only.
Infinite wars, infinite debt.
The future?
Having had the “privilege” of accepting credit cards in my business, I can attest to the fact that merchants get dinged on any transaction.
I can also attest to the fact that closing a merchant account (which is what you need in order to accept credit cards) isn’t that easy. In fact, the company I had my merchant account with, Chase Paymentech, tried to charge me a $500 cancellation fee.
I fought them tooth and nail, and they put that $500 back in my bank account. They also closed my merchant account. Good riddance to Chase Paymentech.
Ouch, $500- Nice to read, you had the chutzpah to stand up to their chutzpah.
Isn’t charging 25% and up for interest on their credit cards on the consumer side, enough rape to the usury laws.
We would pay 12%, if we didn’t pay our cc’s in full each month, and we have 850 FICO’s. Usury laws, what are those?
I read on one ad for a prepaid Mastercard that “many people consider having a credit card as having a higher status form of payment”
Prepaid credit cards are the saddest of all. It’s not like anyone is giving you interest on the money you prepay (same with starbucks cards and so on).
I think credit cards used to be a status symbol, back when it was actually hard to get one. In a 70s/80s TV show or movie, one of the ways they will show that someone is rich is to have them say “charge it” in a very imperious way, or show a flash of a CC in their wallet, or on the restaurant tab. Somehow, that status has stuck with the cards a little even now that everyone’s got them. People are so weird about status.
I’m pretty sure that most people using credit cards are folks who don’t even have a bank account….ie, lower-income, illegals and teenagers (parents give kids aprepaid cards for spending money or emergencies).
Oops, sorry, meant to say “most people using prepaid cards”…
Don’t know about the “status” of credit cards. The people I hang out with think using a credit card (not debit) for minor purchases is silly. People’s do eyes get a bit bigger when I pay for dinner out of a wad of cash (maybe they think I’m a recreational pharmaceuticals distibutor?).
I was actually around to answer the phone for one of those “lower your interest” calls the other day. Once I was there for the call so I hit the number to get off their list and that didn’t work. (I am already on the “do not call” list.) The second time I pushed the button to get a person and immediately asked for the name of the company she worked for - click. The last time, I was a little more gentle. Asked what the offer was (reduce interest on MC and Visa cards). Asked if it was for a new card (no). Asked the name of the company (Account Services). Asked what state they were organized in - click.
I’d love to report these guys. Anyone ever had more luck figuring out who the heck they are? It is the phone message that starts, “There is no problem with your account…”
Argh! I got 3 of them in a 4-hour period on saturday!! Same message!!
Each time, I waited to get a Real Person, and each time I got halfway through the ‘we’re on the National Do Not Call List - what’s the name of your company…?” spiel before they hung up on me.
I just hate those friggin recorded messages!
Its the nadir of advertising - too cheap and too lazy to promote your product, in a way that doesn’t insult and belittle the people you’re trying to make money from.
My wife started singing to the telemarketer yesterday. Freaked me out. It took them 6 hours (for the next shift?) to call back, so maybe it worked.
“Home buyers are unlikely to put down offers on houses that they think will lose value — no matter how much the Fed does to lower mortgage costs. Banks with mounting loan losses will shy away from lending to borrowers they think might go bust — no matter how much money the Fed pumps into the financial system.”
Can’t be a good sign when big name economists with FOMC experience start talking common sense…
P.S. At least the stock market is holding up well today. I guess a bottom is at hand, with the incipient FFR cut tomorrow and all…
Thank god it’s St. Patricks day so I can justifiably get stinking drunk to celebrate the dollars continued destruction, more inflation, golden parachutes and bonus payouts for white collar criminals, and the continued reinforcement of the fact our government punishes savers while rewarding outright stupidity and fraud.
The nation as a whole needs a drink. People will panic once they realize how much wealth is goine.
Dang! Not allowed during the 1st stage of my low-carb diet.
Got Popcorn?
Neil
If you’re on a low-carb diet, you should change your sig.
Got pork rinds?
Isn’t vodka low or no carb?
(Just tryin’ to be helpful …)
What about that low carb rum and diet coke?
Neil=Here’s a tip on low carb w.o.e. (way of eating):
go to south beach diet for beginners (google it)and print the free glycemic food lists (the lower the better), and you’ll learn to eat to thin, without thinking about it. The low glycemic/low carb w.o.e. is tasty and low effort. Best of luck. I’ve been thin for 3 years now, and still eat some cake now and then. It is a healthy way to eat.
“low-carb diet”
I recommend popcorn sans butter.
No, he should eat just the butter.
“low carb diet”
i recommend butter sans popcorn
Paulson made some comments. He heads the President’s Working Group on Financial Markets also known as the Plunge Protection Team (PPT). He is commenting on Bear Stearns and is trying to say that everything is working fine and the President is pleased.
Brother, could you spare a Billion?
A billion, not to worry; but I looked at your balance sheet - looks like you need a Trillion.
My tin cup can only hold around a Billion, sorry.
http://www.nytimes.com/2008/03/17/business/worldbusiness/17ubs.html?ref=worldbusiness
The Swiss bank UBS is considering cutting as many as 8,000 jobs to save costs, and will not rule out a possible split of its wealth management and investment banking business, a Swiss newspaper reported Sunday.
Also, looks like Lehman headed back down as rumors persist that they are the next house of cards to fall. Down near 40% for the day
“The Swiss bank UBS is considering cutting as many as 8,000 jobs to save costs”
With all the pink slips going out, Pink is the new Black.
Red is the new black, too. And blue.
We live in colorful times.
I didn’t realize airships could tailspin?
“‘The problem is bigger than the Fed,’ said Meredith A. Whitney, an Oppenheimer financial services analyst. ‘Trillions of dollars of securities were underwritten on the false assumption house prices could never go down on a national basis. That falsehood has put the entire financial system in a tailspin.’”
Pb Zeppelin
A reason to only listen to The Rolling Stones:
Mick Jagger, a graduate of LSE. “They demand my music, so I supply it.”
As opposed to 10 principles of economics by Mr. Gregory Mankiw
as translated.
Youtube
http://tinyurl.com/yputjx
…………..only when you let out all the gas………………
How can a company be valued at $80 a share one day and then be sold for $2 a share the next? The public needs an explanation of the accounting used in both instances. It makes absolutely no sense.
What’s more, how can investors trust the book value of any other publicly traded financial company?
There was no bid for any of the junk.
The tangible book value of financial institutions is located in the dark side of the force.
So, is it all a farce? Are you suggesting it’s all make believe? Did you know, according to CNBC, Bear was going to report positive earnings today? Who signed off on those numbers? The public needs answers!
What’s more, did the Fed really have authority to do all that it did over the weekend OR does it need congressional authority?
Bush could just sign an executive order so all the other messy congressional stuff can get out of the way.
The Federal Reserve has authority.
Why would anybody in their right mind believe anything from a TV entertainment show? Does anybody really believe Survival Wisconsin is real? CNBC is for entertainment purposes only. The goal is to sell advertising. Every second without a commercial is lost revenue.
How in the world does a company worth 250 million dollars get a 30 billion dollar loan? These numbers do not make any sense.
Because when a bank has all it’s cash get withdrawn it no longer matters how much money you make or have made, you’re bankrupt. One of the first things accountants have to explain is that you can’t spend retained earnings.
The header from Bear Stearns’ Investor Relations page:
Never an unprofitable year—Bear Stearns’ primary emphasis is on creating long-term value for shareholders.
Laugh.
Did you guys read this? LOL!!!!!!!!!!! A realtor!
http://biz.yahoo.com/rb/080317/bearstearns_mood.html
“A lot of these people are going to lose their jobs, and most of their wealth will have been in share options. They’re soon going to be looking for a cheaper place to live.”
Thoughtful and sensitive. Definitely a realtor.
No payouts for execs? like a ‘golden parachute’?
I don’t believe that one. The only co in USA that doesnt’?
where is that $2.00, I might need that later…
How about renting ? DuuuuuuuH !
Aw, Mo, don’t say things like that. If they started renting, they’d be throwing their money away.
Street vendor Hassan El Ashkar, who sells coffee and bagels outside the bank’s Manhattan headquarters, had his morning rush at 6 a.m., much earlier than usual
$2 special this week only
Whatever happened to having a proper breakfast before you leave for work?
Slim, that concept doesn’t allow for spending $5+ for a seething $hitpot of sweeten goo alledgedly known as coffee at Starbux.
From that article;
“To add insult to injury, Bear Stearns does not offer payouts, known as ‘golden parachutes,’ for executives in the event of it being taken over”
Now, didn’t I read where these assh*les split 305M or so among 90 executives 24 months ago or so? Now the financial moves that they were so handsomely paid their bonuses for resulted in the business being sold for 265M, or less than the bonus total, and they are whining about it? Sounds like they did a wonderful job in screwing over their employees and investors.
I hope the rest of the employees kick their ass on the way out of work this afternoon.
RE: This is about catching a falling chainsaw. It’s not just about cutting yourself if you get it wrong, it’s about losing a limb.’”
Easily the Quote of the Month!
“From Reuters. “A lot of people lost a lot of money: Entrepreneur Joseph Lewis, a reclusive Englishman who made a fortune trading currencies, bought a stake of about 10 percent in Bear and stands to lose around $1 billion.”
“The jittery mood means even well positioned banks may be reluctant to take advantage of acquisition opportunities, bankers and analysts said.”
“‘I think M&A is too difficult now,’ a London banker said. ‘This is about catching a falling chainsaw. It’s not just about cutting yourself if you get it wrong, it’s about losing a limb.’”
“Lewis, a former currencies trader who was born in an apartment above a pub in London’s East End, declined to comment through a spokesman. The loss is almost half his $2.5 billion fortune, as estimated by Forbes magazine in its 2007 survey.””
Crazy! But they deserved it! The rich lose their money to the poor.
“The jittery mood means even well positioned banks may be reluctant to take advantage of acquisition opportunities, bankers and analysts said.”
Banks are sans capital. Bank of America, Citigroup et al are broke. There are no well positioned banks.
Mr. Lewis let his ego get in the way of an investment. He will take the loss and it will be worse than if he were to capitulate at $4.00 than at $0 when all the law suits are settled.
I’m sick of seeing the boo hoo reports of people with billions losing half. They still end up with more than most people can even imagine ever having. Real people are struggling to just get by, real responsible people are seeing their efforts thwarted by the devaluing of their dollars and all the scum are crying poor. I’m just disgusted by the whole mess today.
RE: “In interviews with The Times, eight experienced loan reviewers said that as marginal lending increased, quantity took precedence over quality. Squads of 10 to 15 veteran loan checkers gave way, they said, to packs of 40 to 50 mostly novice reviewers posted at or near sub-prime factories such as now-defunct Orange County lenders New Century Financial Corp. and Ameriquest Mortgage Co.”
Apply exactly the same scenario to the appraisal business.
Small numbers of established, credible appraisers replaced by hordes of johnny-come-lately, bucket shop, rubber stampers, instructed to obscure negative property and/or neighborhood commentary (LIE!) and then hit a predetermined number.
The major perogatives and criteria for lender appraisal work:
-How fast can you get it done?
-How cheap will you work?
Guess their business model has bitten everybody in the azz.
Try to post again.
Paul Krugman on the “B Word” opinion page NYT
http://tinyurl.com/yobkcb
Hour-long discussion of Bear Sterns on On Point:
http://www.onpointradio.org/
Guests:
Dennis Berman, global deals editor for The Wall Street Journal
Peter Coy, economics editor for BusinessWeek magazine
Douglas Elmendorf, senior fellow at the Brookings Institution
Gillian Tett, capital markets editor for the Financial Times
and Bill Fleckenstein, president of Fleckenstein Capital, which manages a hedge fund based in Seattle, and author of the new book “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve
Wouldn’t it be wonderful if, someday, info about books like this were the top few links that showed up when you googled AG’s name or nickname?
Polly, yes, it would!
Sometimes I accidentally type http://www.theeconomist.com instead of http://www.economist.com (for the magazine), and there is a weird page with a big picture of AG’s head, grinning. *shudder*
During lunch I caught a bit of CNN and the talking head (I forget his name) actually used the D-WORD. He said the Fed’s actions were necessary to prevent a depression. He also said that failing to act would have meant “horrible, horrible” consequences for the country.
This is quite a change from the usual rah-rah. First time I’ve heard the mainstream news outlets dare to use the dreaded d-word. Does this mean a) a corner has been turned in regard to media coverage, b) MSM is trying to justify taxpayer bailout by saying how much worse things would be without it, or c) just that this guest won’t be invited back?
Last Friday, on Bloomberg, David Tice of the Prudent Bear said we’d end up in a depression but was unsure of the magnitude.
The “D” word is finally beginning to pop up. It’s becoming increasingly difficult not to notice how frequently the Fed is having to resort to rare measures, the staggering financial losses, falling dollar, increasing foreclosures, etc.
OT…
Coughlin Stoia Geller Rudman & Robbins LLP Files Class Action Suit against the Bear Stearns Companies Inc
Coughlin Stoia Geller Rudman & Robbins LLP (“Coughlin Stoia”) (http://www.csgrr.com/cases/bearstearns/) today announced that a class action has been commenced in the United States District Court for the Southern District of New York on behalf of purchasers of The Bear Stearns Companies Inc. (“Bear Stearns”) (NYSE:BSC) common stock during the period between December 14, 2006 and March 14, 2008 (the “Class Period”).
If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Samuel H. Rudman and David Rosenfeld of Coughlin Stoia at 800/449-4900 or 619/231-1058, or via e-mail at djr@csgrr.com. If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.csgrr.com/cases/bearstearns/. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.
The complaint charges Bear Stearns and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Bear Stearns, through its broker-dealer and international bank subsidiaries, provides investment banking, securities and derivatives trading, clearance, and brokerage services worldwide.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, Bear Stearns stock traded at artificially inflated prices during the Class Period, reaching a high of $159.36 per share in April 2007. In late June 2007, news about Bear Stearns’ risky hedge funds began to enter the market and its stock price began to fall. On March 10, 2008, information leaked into the market about Bear Stearns’ liquidity problems, causing the stock to drop to as low as $60.26 per share before closing at $62.30 per share. On March 13, 2008, news that Bear Stearns was forced to seek emergency financing from the Federal Reserve and J.P. Morgan Chase hit the market and Bear Stearns stock fell to $30 per share. Then, on Sunday, March 16, 2008, it was announced that J.P. Morgan Chase was purchasing Bear Stearns for $2 per share. By midday on Monday, March 17, 2008, Bear Stearns stock had collapsed another 85% to $4.30 per share on volume of 75 million shares.
According to the complaint, the Company’s Class Period statements were materially false due to defendants’ failure to inform the market of the problems in the Company’s hedge funds due to the deteriorating subprime mortgage market, which would cause Bear Stearns to have to rescue the funds, cause the Company and its officers possible criminal liability and hurt the Company’s reputation.
Plaintiff seeks to recover damages on behalf of all purchasers of Bear Stearns common stock during the Class Period (the “Class”). The plaintiff is represented by Coughlin Stoia, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.
Coughlin Stoia, a 190-lawyer firm with offices in San Diego, San Francisco, Los Angeles, New York, Boca Raton, Washington, D.C., Philadelphia and Atlanta, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations. The Coughlin Stoia Web site (http://www.csgrr.com) has more information about the firm.
Coughlin Stoia Geller Rudman & Robbins LLP
Samuel H. Rudman and David Rosenfeld
800-449-4900
619-231-1058
djr@csgrr.com
So who is going to pay if you win? The Federal Reserve?
Presumably JPM is the target. They bought the liabilities in addition to the assets.
Class Action, meet Mr. Stone.
Bear Stearn’s building worth six times the company, and just so the company’s shareholders don’t think of backing out, the agreement gives JPMC the option to buy it if BS backs out of the deal!
http://www.bloomberg.com/apps/news?pid=20601087&sid=aohaZhXkSMWQ&refer=home#
BS’s real estate holdings are the only thing of value they have left?
That is ironic.
From the article:
“‘It’s simply the best office building in the history of the world,’ Jimmy Cayne, then chief executive officer of Bear Stearns, said in an August 2001 interview. ‘We have a city block in the heart of Manhattan, USA. Visionaries, sometimes they win.”’
And sometimes the Visionaries turn out to be Dingleberries, Mr. Cayne.
It has a horrible location from the point of view of the public transportation system.
48th and Madison isn’t near any subway stop. Admittedly, we are only talking about modest walks in Manhattan but still!
it’s on Vanderbilt around the corner from Grand Central Station. You dont get more convenient than that, great especially for the suburbuban bankers heading home to Westchester, Darien and Greenwich.
Ironic, it may kill the JPM commitment to build a new tower at Ground Zero althoguh they may need a trading floor. BS’s tower is in a primo spot right next to Grand Central(it used Grand central air rights), brand spanking new. also ironi, BS’s tower was built with huge financial incentives from the city, and they have to stay in NYC for 50 years. LOL. Well they made it 5 years,
“In interviews with The Times, eight experienced loan reviewers said that as marginal lending increased, quantity took precedence over quality. Squads of 10 to 15 veteran loan checkers gave way, they said, to packs of 40 to 50 mostly novice reviewers posted at or near sub-prime factories such as now-defunct Orange County lenders New Century Financial Corp. and Ameriquest Mortgage Co.”
We staffed the Iraq rebuilding effort, with novices as well…
How’s that going?
Abby Cohen being shelved will be cited as the bottom of this move down.
You watch.
I was going to ask you Ms. Tx what the charts look like. If you have time young lady I would greatly appreciate it.
Which one?
Here’s a howler:
http://www.businessandmedia.org/articles/2008/20080317110946.aspx
How equity traders are perceived by the rest of the trading world:
“…Equity markets have rebounded sharply with the Dow up over 100 points and the S and P nearly unchanged. Have never understood stock traders or the functioning of the equity markets. I think to operate in that fraternity one must be born with some permanently bullish gene and one must always have a perpetually sunny vision of life. But in this instance I think they are grasping at straws and rallying falsely. I suppose there is optimism that the Fed will cut rates significantly tomorrow at the conclusion of the FOMC meeting. That is certainly true but the occasion for that move by the Federal Reserve is that we marched to the edge of a cliff and stared at financial Armageddon over the weekend. Unless one believes that Bear Stearns was the root cause of all that ails the system ,then there is more pain and suffering to follow and the cognitive dissonance manifested by the divergence between stocks and bonds should be decided in favor of bonds as the instrument transmitting a message with clarity and precision….”
Across the Curve
That is just garbage. Anyone who stays in this game for more than 5-10 years becomes permanently bearish. It would be impossible not to with all the chicanery and thievery you see every day. I doubt I’ll ever see another bull market I can really believe in.
What she said.
However, there’s some truth to the fact that the whales are trained to be perma-bulls. You should read some of the sh*t that the analysts shovel.
Everything is a bullish signal.
Dollar up? US is in great shape.
Dollar down? Manufacturing will benefit, international profits will rise.
Unemployment up? Company profits will be better.
Unemployment down? People will buy more stuff.
It’s like a crock of perma-cr@p.
I believe in bull markets and I believe in bear markets. From a currency/interest trading perspective: the equity markets rarely move and then it is up.
Speaking of mortgage practices…
http://www.nydailynews.com/money/2008/03/17/2008-03-17_struggling_with_the_home_loan_from_hell.html?ref=rss
“The day Mike and Trudy Scafiddi were supposed to get a $40,000 home-equity line of credit, a man in a UPS uniform showed up at their Huguenot, Staten Island, townhouse - to handle their closing. That wasn’t the only shock. The documents he brought from First Residential Mortgage Network that July 2006 day were for a $280,000 fixed-rate mortgage at 8.5%, with monthly payments of $2,313 - a loan that would refinance their two-bedroom home off Huguenot Ave.”
I threw him out,I should have left it at that.”
“Moments after the departure of the UPS deliveryman - who it turned out was also a notary public - the phone rang. Their loan adviser at First Residential in Louisville, Ky., Bo Hoffman, was calling with another man on the line. They urged Scafiddi to take the refi deal.”
And he took it.
“People will say, ‘Screw you, you were an idiot,’ and for a minute, I was.”
“Screw you, were were an idiot!”
This is just getting easier and easier. It’s like shooting fish in a barrel.
The Federal Reserve and the central banks are now at war with responsible Americans.They are eroding our savings at an alarming rate. I say we fight back and kick up the walking away from our debt traps up a few notches. Let the tsunami of jingle mail begin. Seriously, how else can we do battle against an evil force who’s only loyalty is to it’s shareholders and who’s only agenda is to financially destroy Americans at large?
“I say we fight back and kick up the walking away from our debt traps up a few notches.”
Who’s “we”? My wife and I have no debt other than a small mortgage relative to our income.
You appear to be looking for some excuse to act irreponsibly toward the repayment of debt. If that’s the case, screw you. If not, my apologies.
Don’t buy from them.
Don’t borrow from them.
Don’t work for them.
Nature will take care of the rest.
Loyality to its shareholders?
If only it were true …
“Aninger, who did work for Clayton and Bohan, said she tried repeatedly to have such loans marked as unacceptable but was overruled by supervisors, who were known as project leads. ‘The lead would say, ‘You can’t do that. You can’t call these people liars,’ Aninger said.”
The Big Lie, brought to you by association with frivilous lawsuits, as cover.
Ben, being that Payne was keen enough to purchase the property, when no doubt he knew of BS’s imminent collapse, I would argue that Payne did what many analysts hav warned investors about: if the upper-managment of a large firm is busy buying private property (which can be sheltered from lawsuits), it is likely the company is in dire straight and will soon fold.
NY Times had an article about a week ago about people putting huge chunks of stock into family foundations right before the price starts tanking if they are restricted from selling by SEC rules on sales by insiders. The timing somehow magically works out to be at the exact moment to maximize the tax benefit.
“Home buyers are unlikely to put down offers on houses that they think will lose value — no matter how much the Fed does to lower mortgage costs.”
But, but, but…the actions of the Fed have not resulted in lower mortgage costs. Mortgage rates went down for a nanosecond after the first cut, then popped right back up and have stayed up and are still incredibly high. Current rates for a conforming loan are higher than the rate we’re paying on a jumbo written in 2005.
“Mortgage rates went down for a nanosecond after the first cut, then popped right back up and have stayed up and are still incredibly high”
The funny thing is, by historical accounts, long term mortgage rates are still low! It’s only because we got used to 5.5% fixed rate that we thing that paying 7% is “incredibly high”.
Historically, above 8% is getting high, and below 8% is getting low. 5.5% was nucking futz! People *should* have been refinancing into the 5.5% and lower their payments, or even switch to a 15 year mortgage at even lower rates, but no, they decided to take cash out of their house and play a game of “chicken” with ARM rates.
““Company analysts found that in the last half of 2007, about 42,000 mortgage applications for property valued at $11 billion misrepresented the borrowers’ earned income.”
That’s after successive tightening in March and August. How bad were the numbers for the first half of 2007? Were there applicants that had more than two legs?
Yes. My parents’ dog applied for a mortgage last March. (Just kidding!)
Our cat Albert was sent a visa card a few years ago, but we didn’t let him use it. Probably would have blown it all on cat nip & cheap dates.
I am starting to worry about those collection calls I get for dogs……..
As in, my two dogs getting late payment calls on their houses. DLB, learn to type…..
‘Everyone knew this was a bubble that couldn’t last,’ he said. ‘We all could see this coming.’
Yes, and that’s why *everybody* was calling us bubble believers ‘kooks’ just 2 1/2 years ago. *Everyone* thought that it *would* last, forever.
I still remember the looks of incredulity I received when I explained my case for a housing/credit bubble.
You mean you got people to actually listen to you?
You did better than I did.
The Rise of American Incompetence
http://www.slate.com/id/2186547/
and the next installment should be “The Rewarding of American Incompetence by American Incompetents”
Karma in action: The family of Ameriquest Mortgage founder Roland Arnall says he has died at UCLA Medical Center. He was 68.
The billionaire helped create and later emerged as a symbol of the struggling sub-prime mortgage industry.
A family statement today said Arnall died that morning at the Los Angeles-based hospital but did not give the cause of death.
Arnall was appointed ambassador to the Netherlands in March 2006 after an approval process that was slowed by unsettled issues regarding Ameriquest, the California-based lending company he founded in 1979.
A major Republican financier, Arnall’s fortune was estimated at $1.5 billion by Forbes magazine last year.
I had the unfortunate experience of reading Alan Greenspan’s “who me, what, worry, you say?” article in the Financial Times this morning on the bus to work and almost had a brain aneurism. I can understand not wanting to admit he focked up, but to just blatantly lie about not having a decent (I believe he might have used perfect) model of risk, takes a lot of chutzpah. And this is the guy that Bob Woodward called the maestro. I could see the housing market debacle coming in 2005 because of affordability, and, granted I am no economist. It just amazes me that he still has a platform, instead of being ruthless mocked and ridiculed. Sheesh!
On another board I frequent, there is an “off topic” section. A year ago some wannabe investors started a thread on stock market… which was the best momentum play for this week, etc.
Well, for a year I have been the lone voice talking credit crunch, market in trouble, housing collapse, recession, stagfaltion… etc.
I have been called every name in imaginable. Chicken Little, doom and gloomer, idiot, moron, loser, bitter renter, bear fooker, conspiracy theorist… plus all those words you can’t say on tv.
Friday, this form one of the bigger name callers and one that claims to be a professional money manager….
“I hate to admit this, but he may not be as far off based as we would like to believe (I still think its better than he projects, but not as much anymore)
I have a buddy who went to take 250K out of his WaMu money market account, and they told him “No” they did not have the funds.
Apparently he is in a little higher risk money market than normal, and it is mostly invested in Muni Bonds and they are having trouble liquidating them.
He says he may get the money on Tuesday. But it could take a couple weeks.”
And a response from another guy that was calling me a moron just a few short weeks ago….
“yeah, I’ve writtn and deleted this same thought several times.
He does understand how it can all fall apart as he is seemingly educated in the linkage betweeen so many elements.
But there’s that bigger part of me that knows he has pessimistic views and I assume he has called 12 of the last 3 recessions precisely.
or not
In any event I certainly appreciate the other view and he lays it out in a way I can understand”
He can’t quite give up the name calling, but he is close. (I have told then dozens of times the only other time I have ever called a recession was 1999. As a computer programmer in tech I could see the wreck coming. They just won’t let themselves accept that I am not a constant Chicken Little.
The first guy comes back with:
“I agree with this.
I have no ill will towards him. He seems like a nice enough guy, and obviously intelligent. I think what he is doing is giving a worst case scenario cause and effect, but at the same time believing that, that is what is going to happen.
Hell, I am in the industry and he does more research on this stuff that I do. LoL.
Sometimes too much information can be a hinderance and cause you to second guess logic.”
So, I am wrong because I know too much??????
A thrid guy (another long-time name caller) jumps in….
“A guy at work who had been selling his house for the past two years in the central valley (awful commute to bay area obv) finally found a buyer; price two years ago $700K, sold it for $400K. Obviously his realtor was a moron but still pretty bad.
Tomorrow is going to be ugly - we’ll see if the market bounces but the fed and JP bailing out Bear plus the discount rate cut reeks of desperation. At dinner tonight, one of the guys told us that he had put 100% of his equity into gov/money market funds which surprised me since he was never a chicken little guy.”
You forgot “Casandra”. I’m not a full time chicken little myself, but I bet at this moment in time, Casandra could beat both Pollyana AND Goldilocks in a cage fight. Three metaphors enter…one metaphor leaves.
A guy from another board that is slowing coming around to our probelms says this:
“I liked to hear some thoughts on this:
So our currency has been devalued against pretty much every benchamrk that means any thing, Yen, Candaian, Euro, Lira, Pound, Etc.
For decades now Countires like China and Russia have bought and held out currency, because it was considered a safe investment and was easy for them to use to purchase goods from other countires. It was a constant. That is not the case right now. The value of the dollar is delcining due to lower interest rates, opening up the money supply and the credit crunch.
USA, (gov., fed and private companies) could use the next few years to their advantage. They can buy American Dollars at a discount, back from foreign countires, which will increase out money supply shore up the monetary policy and when our economy stabalizes; (Say in 18 months to 3 years) then our dollar will go further again in those nations.”
My response was… buy the dollars with what? Dollars?
147 million ounces of gold… at $1000 an ounce is $147 billion…. about 3 months of our trade deficit.
Through the Looking Glass has published some nice graphs on the solvency crisis.
Basically the graphs are the Federal Funds lending data/savings/reserves data
“…And, as we’ve already seen, helping the homeowners would indirectly help the Wall Street institutions as well, a very great deal. Perhaps critical help, because even the Fed’s current desperate measures have their limits. For obvious reasons, they’re not just printing all those dollars that they’re loaning to the banks, though they could; instead, they’re funding those loans by selling from their stash of absolutely secure government bonds. But that hoard, while huge in ordinary terms (hundreds of billions of dollars’ worth), is finite — past a certain point, they’ll have to start doing something else, perhaps something even riskier than helping the afflicted….”
http://tinyurl.com/2e7edt
Those graphs go straight up for borrowing and straight down for reserves. Fricken scary graphs. If homes prices continue to fall as I expect them to there will be alot more borrowing from the FED. When will home prices go back up enough so that banks don’t need to borrow ? 10 years? This isn’t going to work for 10 years. What next?
“Investors have become gloomier about the outlook for house prices since the start of the year, according to trading in futures based on the 10-city S&P/Case-Shiller price index. Traders see prices tracked by the index falling 13-1/2 percent by November, more than double the drop foreseen in early January.”
How does one go about shorting this index, or trading in its futures? Can this be done using an ordinary brokerage account?
‘Many, many, many stated income loans were rejected,’ he said, but the loan buyers often bought the rejected mortgages anyway.
I don’t understand how that works. If the mortgage was rejected, what is there to sell?
The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War
I thought there was a huge housing boom after WWII, spurred by GI programs to give mortgages to veterans. So when he says “most wrenching since the end of WWII,” is that really a euphemism for “most wrenching since the Great Depression”?
“‘It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities,’ he said.”
Problem is, of course, that the stable point will be low enough that most if not all of today’s “troubled” ones will have negative equity, meaning most likely stability will be reached only after most of them give the house back to the bank.
What is now shocking me is how one man ,the Fed. Chairman, can have this much power . Right now BB’s moves have more power to shape the American Destiny than the powers of the Senate and Congress ,the State and City governments ,the Supreme Court or Judicial systems and even the Presidents powers .
While the Fed bail-outs are in effect taxation without representation for starters ,the acts of the Feds are clearly catering to Wall Street and Main Street gamblers .No vote from the public on the inflation policy that was done for the benefit of Wall Street/ lenders, but scr*wed the common man/women .
As I see it the government had to come up with 30 billion to get a Company ( J.P.Morgan)to buy a firm that was no longer solvent and would of went BK. Does that mean that Bear Stears was worth minus 30billion ?
Somebody said on the news today that the employees owned 30% of the stock at BS ,and that with a average employee holding of 2 million in stock per employee , it just went down to a average value of 80k .
So if this is true ,than the employees at Bear Stearns just ate it . But you know the old saying about if you work for the Devil, your going to get burned .I would love to know about the major stockholder that got burned out of 1/2 his fortune and how he really made that money to begin with .
I was listening to Crammer for 5 minutes today and it was enough to make me want to puke . In so many words ,Crammer was saying that JP Morgan pulled off a good deal and we taxpayers should right a check to the CEO of J.P Morgan . Crammer went on to say words to the effect that Bank of America was really stupid to buy Countrywide with money when they could of made the Feds pay part of it . The impression I got from Crammers rambling about this subject was that Wall Street thinks the Fed Chairman is stupid and they are playing this bail-out deal for what its worth .It’s funny when you see Wall Street creeps express guilt
about fleecing the taxpayers ,when they know they were the bad guys and should be punished . Reminds me of the book Crime and Punishment, whereby the murderer knows he can get away with the crime ,but the law knows his guilt will undo him .
But my point is that the course has been set with bail-outs ,that will only increase ,rate decreases will only continue and we will continue to see the gamblers /blackmailers smirk at every good deal they get .Nobody in the World wants to buy the bad loan paper ,so there is no reason why the US taxpayer should get stuck with it .
If the situation behind closed doors is such that the Fed Chairman is making these moves for a greater good ,than he has not been able to explain it or prove it .