I am going to do something I rarely do. Since the argument I am making is a bit tricky, I will pretend that I am a journalist. Here is the possibility which I would like you to consider. Yes, I know that this sounds like a stretch. That is what all the supporting material that follows is for. Ready?
What if Bear Sterns did not really go bankrupt all by itself but it was nudged that way and JP Morgan was given a bunch of money to buy Bear Sterns in order to cover up the fact that Carlyle Capital, owned by
The Carlyle Group of Saudi/James Baker III/Bush Family fame was going belly up after a year of cash infusions. By creating a huge mortgage lending crisis scandal to time with the demise of the Carlyle Group’s own mortgage lending company, the Bush administration could prevent anyone from noticing the fact that Carlyle Capitol defaulted on $16 billion in debt. And also consider the possibility that Eliot Spitzer was targeted by the Bush Department of Justice at the exact same time to prevent anyone in New York State from getting nosy.
Ok, now for some supporting evidence.
Two things happened almost simultaneously back in March of this year. From Greg Palast:
http://www.gregpalast.com/elliot-spitzer-gets-nailed/ This week, Bernanke’s Fed, for the first time in its history, loaned a selected coterie of banks one-fifth of a trillion dollars to guarantee these banks’ mortgage-backed junk bonds. The deluge of public loot was an eye-popping windfall to the very banking predators who have brought two million families to the brink of foreclosure.
Up until Wednesday, there was one single, lonely politician who stood in the way of this creepy little assignation at the bankers’ bordello: Eliot Spitzer.
Palast makes a very convincing argument that Spitzer was a man whom the mortgage lenders----and their partners in crime in the federal government—feared as the their incompetent, perhaps even criminal business practice were about to bear fruit.
Instead of regulating the banks that had run amok, Bush’s regulators went on the warpath against Spitzer and states attempting to stop predatory practices. Making an unprecedented use of the legal power of “federal pre-emption,” Bush-bots ordered the states to NOT enforce their consumer protection laws.
Indeed, the feds actually filed a lawsuit to block Spitzer’s investigation of ugly racial mortgage steering. Bush’s banking buddies were especially steamed that Spitzer hammered bank practices across the nation using New York State laws.
Now consider this article. Ellen Brown suggests that Bear Sterns was never the problem. Instead, JP Morgan was the one in need of the bailout. In order to keep its reputation pristine and give it some cash and more assets,
Bear Sterns’ stock was driven down with malicious put options that cost employee stock owners big bucks and tax payers even bigger bucks in loans all to enable JP Morgan to acquire Bear Sterns---loans that will never have to be repaid.
http://www.webofdebt.com/articles/banking-bailout.phpAnd just look at what they have done with
our tax money . Money that they are getting for free, no strings attached. They do not have to promise to be better businessmen or make better loans or stop with the crazy mortgages that no one can possibly pay.
http://socialistworker.org/2008/03/28/who-gets-a-bailout Even now, Cayne will walk away with more than $16 million while JPMorgan has already reportedly made lucrative offers to hire top Bear bankers and brokers. Under pressure from Bear's board of directors, Morgan sweetened the pot, raising its initial offer of $2 per share to $10 on March 24--again winning praise from Schwartz.
Bear's 14,000 employees, in contrast, have fared poorly. They own an estimated one-third of its total shares, which only last year peaked at $171.50 per share. As Bear sheds half of its workforce, many will face financial ruin. The cost to workers whose pension funds have been invested in Bear Stearns is unknown.
How are such things possible? Our SEC has its head up its ass and the Federal Reserve exists to service the banks. During the Bush administration, most of the honest attempts to hold the investment community accountable for its wrongdoings have come out of the state of New York. But not any more.
Using blackmail information that came from dubious sources (possibly from warrantless wiretaps) and threats of a Mann Act prosecution to take out the Governor of New York who also happens to be the son of a billionaire is a bold move, even for the politicized Bush Department of Justice. That kind of excessive show of force is usually reserved for a personal threat to the Bush Empire. Like Enron. Or a threat to the Carlyle Group.
Bet you did not know that back in 2006 the Carlyle Group decided to jump into the mortgage lending business. Unfortunately, they did not do very well in the mortgage business. Check out this time line, and you will witness the parent company throwing good money after bad all through the second half of 2007.
http://www.reuters.com/article/businessNews/idUSL1342106820080313The writing was on the wall. Carlyle Capital was going down. It was just a matter of when. And there was no way that Bush Jr. would be able to give his Daddy’s company a federal bailout, not with the Democrats in control of Congress. This was not going to look good on the business record of Carlyle.
Now, think for a moment. What does the Bush family always do when they are faced with a scandal? They light a fire somewhere else and hope that the smoke from that fire keeps people from seeing the awful truth. This is Papa Bush’s number one way of dealing with any difficult situation, and he has passed it down to Shrub and Karl Rove and Dick Cheney, too.
With that in mind, I will bet you can guess what happened next, even if you do not read the business pages of the Wall Street Journal. At the same time that Eliot Spitzer was being taken out of public life and the feds were handing out $200 billion dollars of
our money so that JP Morgan could buy Bear Sterns, the Carlyle Group’s Carlyle Capital made this announcement (but the U.S. mainstream media was gracious enough not to make a big deal about it)
http://www.reuters.com/article/businessNews/idUSN1651831320080317?pageNumber=2&virtualBrandChannel=0 NEW YORK/AMSTERDAM (Reuters) - Investment company Carlyle Capital Corp CARC.AS said on Sunday its shareholders have voted unanimously in favor of a compulsory winding up.
The company said it will now start winding up and sell its remaining assets under Guernsey law, and NYSE Euronext said that the fund's shares would trade under a separate category as it goes through the process.
snip
Amsterdam-listed Carlyle Capital said on Thursday it has defaulted on $16.6 billion of debt and was unable to reach a deal with lenders.
It said on Wednesday that talks with lenders deteriorated after a decline in the value of its mortgage investments, which it said would result in margin calls of $97.5 million on top of the $400 million it was already facing.
Oops.
Luckily for the Bush Dynasty, Reuters assured us that the Carlyle Group’s reputation would not be damaged
by walking away from $16.6 billion in debt .
http://www.reuters.com/article/bankingFinancial/idUSN1361636620080314?sp=true PHILADELPHIA (Reuters) - U.S. private equity firm Carlyle Group should emerge relatively unscathed by the cratering of affiliate Carlyle Capital Corp CARC.AS (CCC), which invested in mortgage-backed securities and defaulted on about $16.6 billion of debt, analysts said on Thursday.
CCC, a fund listed in Amsterdam, said late on Wednesday that it expected its lenders to seize its remaining residential mortgage-backed securities assets after failing to reach a deal to refinance its debt.
The problems faced by CCC -- the decline in the value of its mortgage investments -- marked another example of the broader global credit crunch instead of a warning sign of trouble ahead for The Carlyle Group , analysts said.
"They don't lose much on a fund like this. It's like when you drop an egg in your kitchen. You just clean it up and throw it away. It's bad if you're the egg, but your kitchen is going to be fine," said Roy Smith, a professor at New York University's Stern School of Business.
You got that? We, the American people, are the eggs. We are disposable.
Anyway, in the course of a single week, Carlyle Capital announced its inevitable collapse, but it was saved from shameful public humiliation
and a whole lot of embarrassing questions by the fact that the Bear Sterns/JP Morgan debacle conveniently happened at the exact same time. This meant that Bear Sterns/JP Morgans became
the mortgage lending crisis by virtue of the enormous cost to the U.S. taxpayer and the familiarity of the names involved---even though a case has been made that the crisis may have been manufactured or at least artificially precipitated. The Federal Reserve would never investigate and the SEC under Bush would never investigate. The only worry was the state of New York, where Eliot Spitzer was governor---and by some strange coincidence, he was removed from office at the exact same time.
In the end, the Carlyle Group’s reputation is spotless, the executives at Bear Sterns still have jobs, JP Morgan is much richer, nothing has been done to help the “eggs” who are still being smashed on kitchen floors all across America, there is now
no court or regulatory body in all the United States where lenders or speculators are held accountable ---
This is Enron style free market capitalism. If you want four more years of it, vote for John McCain and his economic adviser, Phil Gramm.
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