Who Takes Park Place - BSC, WM and JPM

[slipslidingaway]

Bringing Down Bear Stearns

http://www.vanityfair.com/politics/features/2008/08/bear_stearns200808?currentPage=1

from this thread
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4151446


"On Monday, March 10, the rumor started: Bear Stearns was having liquidity problems. In fact, the maverick investment bank had around $18 billion in cash reserves. But soon the speculation created its own reality, and the race was on to keep Bear’s crisis from ravaging Wall Street. With the blow-by-blow from insiders, Bryan Burrough follows the players—Bear’s stunned executives, trigger-happy reporters at CNBC, a nervous Fed, a shadowy group of short-sellers—in what some believe was the greatest financial scandal in history...


...Around six Schwartz slipped into the back of a black town car for the drive home to Greenwich. Somehow Bear was still alive, if barely. Thanks to the Morgan credit line, they could probably open on Monday. Now he had 28 days—28 days to raise new capital, find a merger partner, or sell Bear outright. It wouldn’t be easy, he knew, but it was doable. Then, as the car cruised northeast, Schwartz’s phone rang. It was Tim Geithner of the Fed, with the Treasury secretary, Hank Paulson.

Paulson came right to the point. “You’ll recall I told you when we cut this facility your fate was no longer in your hands,” he told Schwartz. “Well, we don’t plan on being here on Sunday night like we were last night. You’ve got the weekend to do a deal with J. P. Morgan or anyone else you can find. But if you’re not done by Monday, we’re pulling the plug.” And, like that, Bear’s 28-day cushion evaporated. The Fed’s credit line was good only till Sunday night.

Schwartz hung up the phone, stunned. He telephoned Molinaro, who was also on his way home, at that moment buying a cup of coffee at a rest stop on the Merritt Parkway. “You’ve got to be kidding me,” Molinaro said.

To this day, top Bear officials aren’t sure whether they misread the “28-day” language or whether Paulson simply had a change of heart after the events of Friday afternoon. “Everyone thought we had 28 days,” says one senior Bear executive. “Do we think they thought that? We think so. But, look, when this was done, we just got a piece of paper that said, ‘If you agree to this, you’ll be O.K.’ We signed. No one spent a lot of time going over all the little details.”


WaMu seizure: The ambush angle

http://dailybriefing.blogs.fortune.cnn.com/2008/09/26/wamu-seizure-the-ambush-angle/

"The sliver of good news in the failure of Washington Mutual (WM), the Wall Street Journal points out, is that it puts no strain on the FDIC insurance fund, which is already dealing with a rash of recent failures of smaller banks. The sale of WaMu’s loan book and retail branches to JPMorgan Chase (JPM) obviates the need to support depositors through application of the federal insurance fund. JPMorgan gets a $176 billion mortgage book and 2,200 branches for just $1.9 billion, though the big New York bank will also take $31 billion in writedowns and raise $8 billion in new capital by selling common shares....

...Now, the feds have taken over and sold WaMu. Like the Fannie-Freddie takeover and the collapse of Lehman, the seizure of WaMu was in some ways predictable and yet, in its execution, leaves questions. John Hempton, a hedge fund manager who writes the Bronte Capital blog from Australia, points to the last paragraph of Friday’s Journal account of the takeover, which reports that new WaMu chief Alan Fishman - who took over less than three weeks ago - and his team flew back to Seattle from New York Thursday night, totally unaware that the Office of Thrift Supervision was about to take over the bank and put it into FDIC receivership..."

And from the comments section...

"CNN reports that JP Morgan Chase will receive from WaMu $307 billion in assets and $188 billion in deposits. Can someone explain to me how the Government can seize these assets and sell them for less than a penny on the dollar?"


Senator Maria Cantwell


"...But I am very concerned about the "pick here, pick there" approach that has transpired in the last several weeks.

“I ask you to just think of one institution, in my State, Washington Mutual -- which I would not necessarily applaud for its subprime lending rates or for its use and backing of credit default swaps, but I would ask you to consider the fact that as that institution was forced into sale by this Government.


“Who were the winners and losers in that?


“J.P. Morgan got the assets of that institution and benefited from that. In fact, J.P. Morgan predicted to me on a conference call the night they acquired Washington Mutual that after one year with their investment, they would have an over $500 million on that investment. That is a 27 percent returned in one year.

“The FDIC got some money out of that, too. And then to say nothing about the over 60,000 shareholders who were wiped out.


“My complaint is: where is J.P. Morgan who should be standing up for the retirement plans, the deferred compensation plans, and other packages that the employees at that company were due?


“It is very convenient for us to now choose that we are going to add to J.P. Morgan's bottom line.



And last but certainly not least, this thread from McCamy Taylor

“We Were Programmed to Crash”

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4138042&mesg_id=4138042


"One of the regulations meant to keep insiders from driving down the prices of their own company’s stock so that they could sell short at will to make a quick million whenever they felt like it was called the “uptick rule”. The “uptick rule” is another one of the FDR Era regulations which the Heritage Foundations was talking about when they said that they wanted to roll this country back to the days of Herbert Hoover. They succeeded. The Bush administration got rid of this safeguard last year---with predictable results...

The SEC eliminated the rule on July 6, 2007.

Why did the SEC do that? Maybe because it allowed for things like this:


“Short sellers have an incentive to spread bad news about companies whose shares they have sold short,” said Jay Baris a partner at the law firm of Kramer Levin Naftalis & Frankel.
Many blamed short selling and attendant rumors for the Bear Stearns collapse several months ago..."


You thought I was kidding yesterday, when I wrote in my journal that we were programmed to crash? No, I was quite serious. I was already gathering the documentation that I needed to write this journal. A stock market crash can be very profitable---if you plan ahead and bet that the market will crash or if you want to snatch up a rival company or if you want Congress to pass an unpopular law..."