Run on Big Wall St. Bank Spurs Rescue Backed by U.S.

[Robbien]

Source: NYT

<snip>

Mr. Schwartz, a well-connected investment banker who has been at Bear Stearns since the early 1970s, appeared on television to try to calm market fears that the bank was in trouble. Skittish lenders were already calling in loans made to Carlyle Capital, a bond fund sponsored by the Carlyle private equity group, as well as Thornburg Mortgage, a major mortgage firm. Soon the attention spread to Bear Stearns as market players began to question the firm’s ability to finance itself, sending its stock into a tailspin.

By late Thursday, Bear Stearns’s top lenders and its hedge fund clients were calling the firm and demanding their cash back, perhaps encouraged by Mr. Schwartz’s comments that the firm’s capital and liquidity were strong.

. . .

The rescue effort began late Thursday evening, when Alan D. Schwartz, Bear Stearns’s chief executive, placed an urgent call to James Dimon, his counterpart at JPMorgan Chase. Mr. Schwartz said Bear Stearns was struggling to finance its day-to-day operations, according to several people briefed on the negotiations, a situation that would threaten its survival.

Assisted by Gary Parr, a top investment banker at Lazard specializing in financial companies, Mr. Schwartz and Mr. Dimon spent the night negotiating the deal, which was not sealed until the early hours of Friday.

The size and terms of the credit line were not disclosed. JPMorgan will borrow the money from the Fed and lend it to Bear Stearns, and the Fed will ultimately bear the risk of the loan.

Read more: http://www.nytimes.com/2008/03/15/business/15bear.html?pagewanted=2&hp

---

Finally. An article headline stating what was going on today. And in the New York Times no less. Sure it is in the Friday night news dump, but a screaming headline stating we just had a huge run on the fifth largest US bank.

The article has a lot more details.

[AX10]

1. SEE THIS!

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3012057&mesg_id=3012057

[ConcernedCanuk]

2. 5 banks have failed in just over a year, compared to NO failures in 2005 and 2006

.
.
.

And more to come I fear

A link worth keeping an eye on

http://www.fdic.gov/bank/individual/failed/banklist.html

A dozen failures were reported in 2002.

Who is running the show down there?

An idiot?

[Robbien]

5. I noticed the BBC had a huge story on this

Our cable and network news just had short stories on it. I would expect the majority of Americans have no idea there was any problem today. CNBC was basically the only station covering the story.

International news stations gave it quite a bit of attention though.

[ConcernedCanuk]

6. BBC is one of my media links, I think I found the story you may be referring to

.
.
.

Bear Stearns gets emergency funds

Last Updated: Friday, 14 March 2008, 20:59 GMT

US bank Bear Stearns has got emergency funding, in a move that raises fears that one of Wall Street's biggest names is on the verge of collapsing.

JP Morgan Chase will provide the money to Bear Stearns for 28 days with the Federal Reserve of New York's backing.

/snip/

MAIN SUB-PRIME LOSSES SO FAR

Citigroup: $18bn
Merrill Lynch: $14.1bn
UBS: $13.5bn
Morgan Stanley $9.4bn
HSBC: $3.4bn
Bear Stearns: $3.2bn
Deutsche Bank: $3.2bn
Bank of America: $3bn
Barclays: $2.6bn
Royal Bank of Scotland: $2.6bn
Freddie Mac: $2bn
JP Morgan Chase: $3.2bn
Credit Suisse: $1bn
Wachovia: $1.1bn
IKB: $2.6bn
Paribas: $197m
___________

Last line in the article is telling

"This is America's Northern Rock."

Much more at the link - none good.

[ryanmuegge]

23. In other news today, the economy is completely melting down and we're all fucked.

Now, back to stories about prostitutes.

[rpannier]

10. "An idiot?"

I see DUH-bya's been moonlighting again

[reggie the dog]

16. i am thinking about taking all my money out banks

and putting it into other forms, cash, gold, hash, etc.

[Acadia Blue]

20. Gold. Silver. You need a very good hiding place or a good safe.

[reggie the dog]

25. secret squirrel

knows just where to hide things, besides I only need to hide 2 ounces of gold if I transfer all of my stocks into gold and another 2 ounces if I transfer my savings. That is not a lot of gold at all and can be stashed quite easily.

[Hulk]

3. Another fine example of who this government really works for.....

While thousands of homeowners are losing their investments and homes due to corrupt and deceptive banking practices, the government totally ignores them and instead, bailes out another big f*cking Wall Stree firm.

Disgraceful!!

This country's government is f*cked.

[magellan]

7. Corporate Socialism -- the Repubs love it

These businesses got themselves into this with their own greed and stupidity, yet the Repubs have no problem handing them billions of dollars to bail them out.

Ask the Repubs to invest in the American PEOPLE the same way though and you're told to go live in a socialist country if you want handouts.

Their HUBRIS and HYPOCRISY and SELF-INTEREST is going to put the GOP out in the cold for many years to come, if not destroy them as a party completely. That's the ONLY bright side to this.

[brentspeak]

28. The Republican way: Privatize the profits, and socialize the losses

[goforit]

4. Our own banks on the the welfare ticket!!! unbelievable!!!

[sce56]

8. This hits home pretty hard!

Last summer Bear Stearns bought the contract my company operates under from Williams Energy! Last month they started talks to renegotiate the contract! I suppose they started to see this coming I guess I need to save that bonus check for the rainy days around the corner.



Shrub says Don't worry be happy spend, spend, spend!
President George Bush speaks about the current economic crisis at a meeting of The Economic Club of New York on Friday, March 14, 2008.

[sendero]

9. Yeah..

... but how many can they bail out? Bear Stearns is not the only big house in deep yogurt. Some think that the Fed has unlimited funds, I'm not so sure.

[DemocratInSoCal]

12. The Fed DOES Have Unlimited Funds

Good Ol' Helicopter Ben said years ago, that the greatest tool the government has, is the Printing Press.

You need not worry about whether there is enough money. They can always make more.

Which is why I'm up over 100% on Gold, and expect to be up several hundred percent more before the collapse of this country's economy is complete.

And I got news for everyone. Not only isn't Obama the answer, even if he was, it will be at least 2 years before the impact of any policies he might implement, will have an effect on the economy. The damage is done, and it will take years to fix.

[Selatius]

13. Yes and no. The Fed can create money using fractional reserve banking.

The actual printing of paper money is still reserved as per US Constitution to the US Treasury, but printing money is not the same thing as creating money on books using account ledger entries. Prior to the Revolution, no private bank could create money in that fashion. Doing so landed you in prison for fraud. Only the state bank chartered by the state legislature could create new money either through printing new currency or through account ledger entries, and if we look at colonial Pennsylvania as an example, they lived with almost no inflation prior to the Revolution, but they printed only enough money to facilitate trade and commerce. Anymore than that and they'd have inflation. Excess notes were retired out of circulation to tap down inflation.

Today, the current banking system guarantees perpetual inflation because every chartered bank has the power of creating money using simple account ledger entries. Back then, only the state-chartered bank had that power. When the English Parliament banned that practice after lobbying from English bankers in London who saw what the Americans were doing as a threat to their own business practices, Benjamin Franklin asserted that was the prime reason, the main spark, for the American Revolution. They would have gladly borne taxes on tea and stamps if it weren't for the fact that Parliament took away their ability to print and issue and control their own currency. That caused an economic depression in the colonies, and it angered many to no end.

http://en.wikipedia.org/wiki/Colonial_scrip

England paid dearly for its greed by losing control of its valuable colonial possessions on the east coast. Now, will we pay for the greed of our own bankers? Time will tell.

[sendero]

14. Well....

... I'm up over 200% on silver and gold, so you aren't the only one who foresaw inflation and the weakening dollar. I've been buying silver since 2003, starting at about $7. :)

That said, I don't claim to understand the workings of the Fed completely, but I don't think it is quite as simple as "fire up the presses".

Not only are there procedural issues, but much more Fed shenanigans and the dollar will become even more worthless, something not much more palatable than letting a bank fold.

[Selatius]

11. There are some ignorant bastards out there. The Federal Reserve is NOT an entity of the US gov't.

It is a for-profit privately owned corporation. It's primary duty is to the shareholders who own the Federal Reserve, not to the US gov't. Like any privately owned corporation, it exists to enrich the shareholders first, serve you second. If there is any conflict between the those two objectives, you, not being a shareholder, get fucked.

The bail-out is NOT backed by the US gov't. It is backed by the Federal Reserve bank. The only way the US gov't would enter into the picture here is if the US Congress OKed a bail-out plan using PUBLIC TAXPAYER DOLLARS for the shenanigans caused by PRIVATE BANKERS.

[Warren Stupidity]

18. Quasi-public.

The fed is chartered by the government and its 'governors' are chosen by the executive branch. It is the central bank of the united states and is only partially independent.

Bsil outs end up being backed by the government - as in the earlier savings and loan bank crisis - as the fed ends up demanding that congress ante up to prevent systemic collapse. This crisis appears to be potentially much larger and global in nature. No doubt we will pay for it.

[dipsydoodle]

15. UK traders told stop dealing with Bear

9PM GMT Friday :

LONDON (Reuters) - Financial market traders across London have been told by their firms to stop dealing with Bear Stearns, while dealers in New York scaled back their transactions with the ailing investment bank, sources in several dealing rooms said on Friday.

At least six major institutions in London -- including Commerzbank, Royal Bank of Scotland and JPMorgan -- had stopped giving prices to the U.S. bank, a credit trader at one European institution in London, who declined to be identified, told Reuters.

Credit Suisse had also stopped trading with Bear Stearns, a London-based equities broker said.

None of the institutions named by the traders would comment on the subject when contacted by Reuters.

http://uk.news.yahoo.com/rtrs/20080314/tts-uk-bearstearns-counterparties-a8bf950.html

[LiberalFighter]

17. Skittish lenders were already calling in loans made to Carlyle Capital

sponsored by the Carlyle private equity group

Call all their loans in. BANKRUPT the Carlyle Group!

[KaseyM]

21. Read Greg Palast on this issue - great!!!! read

"While New York Governor Eliot Spitzer was paying an ‘escort’ $4,300 in a hotel room in Washington, just down the road, George Bush’s new Federal Reserve Board Chairman, Ben Bernanke, was secretly handing over $200 billion in a tryst with mortgage bank industry speculators.

"Both acts were wanton, wicked and lewd. But there’s a BIG difference. The Governor was using his own checkbook. Bush’s man Bernanke was using ours."


http://www.gregpalast.com/elliot-spitzer-gets-nailed/

[Theres-a]

22. Good article,thanks

Welcome to DU!:hi:

[Acadia Blue]

19. In USA all the rePIGs were railing against welfare moochers and

when I broght out the corporate welfare issue all they could do was call me really nasty names. They could not argue about it.

[cliss]

24. The latest news is that

this emergency infusion of cash will not help Bear Stearns. In other words, the investment bank will fail. Probably some time next week.

Guess what this means about the dough that the Fed gave them?

Take a guesss as to who's on the hook for those billions?
I heard it was $200 billion (could that be possible)

[ozymandius]

26. Fed and Rival Bail Out Bear Stearns (done deal)

Source: AP

NEW YORK (AP) -- On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government. The near-miss raised new alarm about the credit crisis -- and whether other big firms might be in jeopardy.

.....

If Bear Stearns were to go under, "it has the potential of bringing down the whole market," said Richard Bove, an analyst at Punk, Ziegel & Co. "This is the crescendo of the crisis."

.....

In backing up JPMorgan, the Fed dusted off a rarely used, Depression-era provision to provide loans. It also said it was ready to step in to fight an erosion of confidence in the nation's largest financial institutions.

.....

JPMorgan, the nation's third-largest bank, has been hurt far less by the mortgage mess than other financial institutions. It will provide secured loans to Bear for four weeks -- insured, in essence, by the Fed.

Schwartz said it would buy Bear time and allow it to convince customers "that we have the ability to fund ourselves every day, to do business as usual." No one has disclosed how large the financing offered to Bear Stearns is.



Read more: http://biz.yahoo.com/ap/080315/bear_stearns.html

---

We may also bee looking at an outright sale of Bear Stearns to JP Morgan with Fed backing.

[bemildred]

27. We need to nationalize al these banks, buy them out. nt