Just heard on Bloomberg that Washington Mutual said that the Fed closed the discount

[still_one]

window on them, which effectively caused the run, and let them go under

What kind of game is being played?

[LaurenG]

1. That is frightening. I'd like to know why. nt

[still_one]

3. I would like to know that also /nt

[spelldmilk]

2. If we are really lucky, and incredibly annoying, I think

we'll hear alot more about gov't manipulation. This economic meltdown was no accident.

[Supersedeas]

4. Bushler and Darth Cheney pulling some strings in October before the election....no way.

[slipslidingaway]

5. Searched for more info and could not find an article, although

I was reminded of this post.


“We Were Programmed to Crash”

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

[still_one]

6. This was from Bloomberg TV where I heard it. /nt

[slipslidingaway]

7. Thanks...just looking for more info, hopefully we'll learn more

about this.

[eowyn_of_rohan]

8. Sen. Maria Cantwell made reference to some dirty play re. WaMu yesterday

How JP Morgan profited from this, and how Wamu clients and shareholders were wiped out. Why was WaMu handed to JP Morgan -Chase? Who owns JPM-C and stands to profit from this? WaMu was negotiating a possible merger last January with JP Morgan... and just a week before their assets were seized by the govt, they were negotiating with Morgan and another company for a buy-out(?) Anyone who knows more about this stuff than I do have any information or opinions on this?

[slipslidingaway]

9. WaMu seizure: The ambush angle

Poking around for additional info...

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

Adding the first paragraph in edit...

"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? To me, that seems like theft, and is irresponsible to the WaMu shareholders. So what if JP Morgan has to write down $31 billion? That just seems to make the deal even more unfair to the rest of us taxpayers because not only did the Govenment practically give them $500 billion, they will get the tax writeoff for the writedown on a loss that was never actually their money in the first place. Am I missing something here?"

[janet118]

12. Oh, look who works there . . . Bush's poodle

Former British PM Tony Blair became a "financial advisor" at J. P. Morgan last January.

Tony Blair will be paid £2.5m a year for his post at US investment bank JP Morgan, it was revealed today.
It is the first of a series of posts that could see the former prime minister rake in a staggering £40million.
He is expected to advise JP Morgan on the political and economic changes brought about by globalisation, according to the BBC.

Is Bush still lookin' out for his wittle doggie?
:shrug:

[slipslidingaway]

16. Thanks for making that connection...

http://www.alternet.org/blogs/peek/73321

"...Blair is not being hired by Morgan for his economic skills, which were never impressive. As JP Morgan’s chief executive Jamie Dimon announced frankly, "There are only a handful of people in the world who have the knowledge and relationships that he has."


...Thanks to pressure from his friend George Bush, Blair was handed a very sensitive assignment: Middle East envoy working on behalf of the US, Russia, the UN and the EU.

Though supposedly focused on Palestinian development, Blair’s activities necessarily involve top level contacts with leaders throughout the world, particularly the leaders of the Middle East, leaders flush with trillions of dollars in assets, leaders making enormous deals and investments around the globe--the kind of deals that are Morgan’s bread and butter.

Is it not conceivable there might be a slight conflict of interest, at least a whiff of impropriety, in Blair’s twin roles as peace maker and deal maker?..."

[slipslidingaway]

18. Also interesting from your article... Trade Bank of Iraq & JPM

http://www.jpmorgan.com/tss/General/Trade_Bank_of_Iraq_Opportunity_Amid_Challenges/1102380206843

"Iraq, one of the world's most interesting new trade-finance markets, offers untold
opportunities and challenges for cross-border trade, and an effective structure for doing
business in the country is rapidly being developed. Bruce Proctor, senior vice president
and global trade-services head at JPMorgan, discusses the Trade Bank of Iraq's role and
explains how companies can take advantage of its services..."


http://www.tbiraq.com/ConsortiumBanks.asp


http://www.sourcewatch.org/index.php?title=Trade_Bank_of_Iraq

"In July <2003>, a consortium of about a dozen private banks led by J.P. Morgan was awarded a contract to provide letters of credit to companies looking to do business in Iraq via its newly formed Trade Bank of Iraq, which for now is being run by the private banks themselves."<1>

The Trade Bank of Iraq opened its doors in November, and by the end of January over 200 Letters of Credit worth over $190 million were issued by the bank and its international consortium. The Trade Bank was formed to help Iraq import equipment and critical supplies. A group of major international banks make up the operating consortium. The Trade Bank is already helping Iraq to reintegrate into the global economy..."

[blm]

22. oh yeah...Blair is a real trustworthy guy... The British were set up in the 90s just as we were.

Focking dog and pony show.

[eowyn_of_rohan]

51. Wonder why Tony Blair was in NYC on Sept 18?

Doubt it was just to be a guest on the Daily Show with Jon Stewart "explaining his position on the Iraq war, and why he agrees with George W. Bush"....

[eowyn_of_rohan]

13. Wow - good work. Sickening. how does Bush/cheneyCo relate to JPMorgan...

Carlyle involved? just wondering which individuals are gaining the most from this heist.

[slipslidingaway]

20. Not sure who benefits the most, although I am sure that some

at DU can connect the dots.

Thanks :)

[Dover]

24. Check out this lobby group connected to Gramm

The Roundtable - "Impacting Policy, Impacting People"........indeed.
A lot of the big boys. Explore the site and notice that Goldman Sachs is not a member.

http://www.fsround.org/about/member_companies.htm

http://www.fsround.org/about/executive.htm

[annabanana]

17. On a side note: "Citibank Government Card Services"

..(who have administered the gov. credit cards for at least the last 8 years) will all be switched out on Nov. 30th for a JP Morgan Chase Government Card.

I know they're supposed to be rotated through various institutions, but I found this an interesting, um, coincidence

[avaistheone1]

38. I heard her speak. It sounded like a scene out of the Wild West. Chase sounds like a bunch of

predators.

[philly_bob]

10. Some discussion in another thread, perhaps related.

about a Cantwell amendment (that never got to the floor) and a conference call she
had with players in the WaMu fire sale.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4151169&mesg_id=4151244

Cantwell's speech:

http://cantwell.senate.gov/news/record.cfm?id=303998

[KoKo]

63. Kick...many folks had retirement and 401-K savings with some in WaMu...

When it went down those folks lost big time... This is something that needs more investigation.

[unblock]

11. i believe you must post collateral to borrow from the fed

and if the fed believes you're fudging your numbers, they could refuse to lend.

at least that would have to be the official reason if they really did "close the discount window on them".

[slipslidingaway]

21. Good point. n/t

[chill_wind]

14. Recommended reading: Bringing Down Bear Stearns (VF August 2008)

Bringing Down Bear Stearns

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

8 pages.

"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."

(...)

Gary Parr, meanwhile, was already on the phones, canvassing every prospective rescuer he could think of. Just about anything was on the table: a merger, a sale of prime brokerage or other valuable assets, even an outright sale of Bear itself. The only way to stop the run, everyone knew, was to find what Parr kept calling a “validating investor”—a big name, hopefully with big money, who would send a message that Bear was still solid. Warren Buffett, with his unmatched reputation for identifying value, was the ideal solution. “If Buffett had put in a hundred dollars, that would’ve been enough,” says one person involved that day. “That would have sent the message.” But there was no rush, at least not at first.

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.”

Goldman Sachs Hank drives a hard bargain.

[slipslidingaway]

28. Thanks, IMO deserves another thread of its own in light of new

developments.

[chill_wind]

30. Can you do one, ssa? Go for it--

I have to git from here for a few hours. More DUers deserve to ponder it.

[slipslidingaway]

36. Agree, here is the link

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4153867&mesg_id=4153867

[chill_wind]

39. Thanks. Just kr'd it. n/t

[aquart]

32. While I still believe Paulson should be hanged....

Nobody deserved to be the target of dirty thieving tricks as much as Bear Stearns.

[femrap]

15. Monopoly!

And I'm not kidding...we'll have a couple of HUGE banks and there will be no competition.

I guess the game is actually Fascist Monopoly.

[slipslidingaway]

23. Citi Takes Wachovia...that was a banner headline on CNBC

the other day.

Makes you wonder.

:tinfoilhat:

[femrap]

49. Wells Fargo must have

called in a 'favor' so they got Wachovia.

Watching the House sell our country to Wall Street....WASF.

In those over 400 pages, there is a section about the Federal Reserve that states banks do not have to pay interest on deposits nor do they have to give you your deposit. How about that?

[slipslidingaway]

52. That changed quickly...read this earlier on the WB sale FWIW

"In those over 400 pages, there is a section about the Federal Reserve that states banks do not have to pay interest on deposits nor do they have to give you your deposit. How about that?"

What the hell does that mean? If you have time and know the section I'd be interested, thanks.


http://siliconinvestor.advfn.com/readmsg.aspx?msgid=25022977

"They're going to make a killing all right -- but they are going to make it by flipping the crap they're buying to the USG at double what they're scooping it up for

Check out this clause from the soon-to-become-law bailout bill :

(e) PREVENTING UNJUST ENRICHMENT. In making purchases under the authority of this Act, the Secretary shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section, including by preventing the sale of a troubled asset to the Secretary at a higher price than what the seller paid to purchase the asset. This subsection does not apply to troubled assets acquired in a merger or acquisition, or a purchase of assets from a financial institution in Conservatorship or receivership, or that has initiated bankruptcy proceedings under title 11, United States Code.

That's why WFC leapfrogged C on the WB assets this morning -- they need to be the acquiring party in order to get in on the gravy train -- JPM already had the best seat taken when they bought WM..."

[femrap]

56. I don't like

Ron Paul by any means, but I do visit Catherine Austin Fitts website, Solari, where I found this:

http://www.dailypaul.com/node/66109

I still don't think that this $700B will keep us out of The Greater Depression, in fact, it will make it worse.

IT'S THE DERIVATIVES, STUPID!

Take care.

[slipslidingaway]

57. Thanks, my head is spinning a bit :) but better to be aware...

also followed a link in the comments section to this post

http://www.dailypaul.com/node/65803

which referred back to a DK post which has 546 comments

http://www.dailykos.com/storyonly/2008/9/30/01617/5440/126/615177


"IT'S THE DERIVATIVES, STUPID!"

:thumbsup:


Ron Paul also thinks we could be guarateeing a depression by trying to prop thinks up now. Video from today, about two minutes.


http://www.c-spanarchives.org/library/vidLink.php?b=1223050850&e=1223051450&n=1

[femrap]

58. I'm as jumpy as a

nervous cat lately. That $700 BILLION is going straight to the rich white boys, IMHO. I think it will just make the Greater Depression worse.

Next week, I fear, will be ugly.

It's rather funny, but I think these rich white boys actually believe they have power over the economy. It's like saying they have power over gravity.

Greed Kills. (I'm old so I remember the saying 'Speed Kills.') lol. Might as well laugh or else I would cry.

Thanks for the links!

Take care.

[slipslidingaway]

61. It is going to be a long, hard road for many people...

not much we can do about it, but we do not have to buy the lies that have been tossed at us the past few weeks.

As Kucinich says the wealth continues to flow to the wealthy.

[femrap]

62. I'm in mood for

the return of Robin Hood! Or at least someone who says to the Corporations: 'I welcome your hatred.' FDR.

[Hannah Bell]

19. That is VERY interesting. Seems like someone's picking & choosing who will fail, who won't.

Like how Lehman was sunk, aig rescued, then mass bailouts announced.

Like how morgan has huge exposure to derivatives, but is sailing right along buying up devalued assets.

[slipslidingaway]

25. Yes JPM too big to fail, and getting bigger...

"Like how morgan has huge exposure to derivatives, but is sailing right along buying up devalued assets."


Wagging The Dog

Full article

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=114&topic_id=37175&mesg_id=37175

"...The derivatives tail is indeed wagging the greater financial market dog..."


"...Alright, fine, so how does the credit default swap market relate to equity market sector volatility of the moment? It is absolutely clear that the "acquisition" of Bear avoided triggering Bear Stearns related credit default swaps and swaps against CDO, SIV, etc. positions they may have held (assuming a potential Bear BK would have forced a mark to market event), which would indeed have happened had Bear formally entered bankruptcy and their bonds/debt became potentially very meaningfully impaired. There is simply no question whatsoever in our minds that this was the key reason a theoretical acquisition of Bear HAD to happen. Remember the details. JPM took out Bear for a couple of hundred million at the headline $2 per share initial offer level, but concurrently announced it was going to need to charge off about $6 billion as a result of the so-called acquisition. Even at the ultimate $10 level (which is basically shut up money offered to help prevent litigation, which might also have led to asset price discovery) JPM was "telling" us Bear was worth far less than zero by the charge-off number alone. Of course the truth simply had to be that if Bear had filed bankruptcy and the credit default swaps written against their bonds/debt/asset positions had been triggered, the credit default swap liabilities in the market would have been well north of a $6 billion hit to whomever had written those Bear specific CDS contracts. Well north. And that simply could not have been allowed to happen. By the way, just as an item of curiosity, JP Morgan has exposure to over 55% of the total banking system credit default swaps outstanding. Are we connecting the dots clearly enough for you?

Sorry, back to the issue at hand. So Bear avoids formally blowing up and the credit default swaps written against their liabilities/investment positions, etc. now become a moot point as JP Morgan (or for the true problem credits, should we say the Fed) is the new creditor and market based asset price discovery is avoided...


...The derivatives tail is indeed wagging the greater financial market dog..."

[Hannah Bell]

43. thanks.

[chill_wind]

37. It is, isn't it? n/t

[dkofos]

26. Still think this whole fiasco hasn't been manufactured??

[kdenninger]

27. What sort of game?

A very hinky one.

I called this a few days before they blew up - The Fed was draining liquidity.

If we need $700 billion, why were they draining what was already in there?

They intended to produce one or more failures, and got two - WaMu and Wachovia.

It was intentional folks.

[chill_wind]

31. "kdenninger" ? :-)

Whoever ye are-- welcome aboard DU.

[philly_bob]

33. Tried to PM you, but "not ready to receive mail."

Are you the enormously knowledgable (if opinionated and sometimes cranky) KDenninger from Market Forum Ticker?

http://www.tickerforum.org/

If you are him, a sincere welcome to DU. You've been an eloquent critic of the bailout, over in that unexplored territory where left and right somehow meet, and I recommend my fellow DU'ers pay special attention to your postings. (You'd probably find a better audience in the daily Stock Market Watch thread.)

If you're not him, I'd consider changing your screen name because Denninger has a considerable following and pretending to be him will probably not turn out to be good kharma.

Mods, feel free to delete if this is considered "outing" an identity or an invasion of privacy or KD requests it, and I will delete it if KD requests in a PM.

[Raksha]

34. Thank you for confirming our suspicions, kdenninger.

And welcome to DU! :toast:

[still_one]

35. I believe it /nt

[RB TexLa]

29. How is it a game? At some point the Fed has to conclude that a bank is going to fail and stop the

emergency lending.

It's neither dirty or a game.

[hfojvt]

40. you don't know which came first

Were they going to fall, or did they have the rug pulled out from under them? And even if they were going to fall, why should $150 billion in assets be sold for $1.9 billion? It does fit the Nixon/Bush/Palin model of governing where a position is not held as a public trust, but as a personal platform.

[lostnfound]

46. Of course it's a game -- a game with a huge payoff for anyone who owns JP Morgan

And likely anyone who owns Goldman Sachs, too.

The game is using government power to make you and 200 of your closest friends really, really, really rich.

[lib2DaBone]

41. That would be your Yellow Cake from Nigeria....

If the fed closes the Discount window, it causes a credit crisis. Thus, people will have to fork over that $700 Billion in small Bills, or the public will loose their retirement savings. We know where the WMD's are located... we can't wait for a Mushroom Cloud over Bagdad.. right Condi?

:sarcasm:

[chill_wind]

42. Or "An Economic Pearl Harbor". n/t

[countryjake]

44. Good question! Kick! n/t

[mhatrw]

45. Heads Bush cronies win. Tails all other US citizens lose. n/t

[moodforaday]

47. Blackmail. Some have termed it

"credit strike", sounds right to me.

[lonestarnot]

48. You give us all your money game.

[ContinentalOp]

50. This shit is scary. Can anything even be done about this?

Is any of this even illegal? By the time Obama is in office, the damage will be done and our country will be truly screwed.

[slipslidingaway]

53. See this also on the BSC deal...

I cannot believe that none of the Democrats know what is going on :(

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4153867&mesg_id=4154205

A few other snips from your article...

"...But the night that Bear signed the original bid, the Fed opened what’s known as the discount window to companies like Goldman Sachs and Lehman Brothers — oh, yes, and to Bear, too. Except that the Fed didn’t tell Bear that it planned to open the window when it was signing its deal with JPMorgan.

Had Bear known it might have access to the discount window — a crucial source of liquidity — it might have been able to hold out for a couple more days or at least had enough leverage to seek a higher bid. But the Fed clearly preferred the original bid...


Even then, the Fed’s fingerprints were all over the new pact. In an action almost unprecedented in takeover history, JPMorgan bought 39.5 percent of Bear on the spot to ensure that it would have close to a majority of the votes to approve the deal. That agreement completely disregards New York Stock Exchange’s rules that prevent anyone from buying more than 20 percent of company without a shareholder vote. Other parts of the new agreement either stretch the rules or disregard years of precedent in Delaware, where both banks are incorporated. Of course, all this rule-bending was done with the tacit, if not outright, approval of the federal government.

If that’s not deal-making, Fed style, what is?"

[lib2DaBone]

54. I don't know what can be done... You saw what they did in St. Paul..

You saw the Brute force they brought to bear in St. Paul for people that were handing out Flyers. They arrested a bunch of 20-year-old college kids with "Terrorist Weapons".. which turned out to be Bic Lighters. They said they found "bomb-making supplies" in a garage... ya, three year old cans of latex paint and some dog food. They even had Media Provocateurs.. a "hippie" under-cover St. Paul Narcotics Detective who was seen with a hammer breaking windows in Downtown St. Paul. (He was seen getting into an unmarked police car after the incident.) How many "Hippies" do you know that carry a brand new hammer to an anti-war event? lol.. me neither.... As a free country.. I think the jury is out... ask Amy Goodman over at Democracy Now... she has some good insight.

[chill_wind]

55. Wachovia! Today. Check it!

Wells Fargo in $15.1 billion deal to buy bank; Citi, regulators object
updated 33 minutes ago


NEW YORK - A battle broke out for control of Wachovia Friday as Wells Fargo signed a $15.1 billion agreement to buy the Charlotte, N.C.-based bank, while Citigroup and the federal regulators backing its earlier deal insisted that Citi’s takeover bid go forward.

"Wachovia at the center of big banking brawl"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4162916

[Leopolds Ghost]

60. Yep. Funny, isn't it? See post below.

I thought these small-to-mid-size banks were collapsing because nobody wanted their toxic assets and liabilities.

Interesting how this is all a trust scheme that Obama and McCain both support to consolidate the banking and
financial industry into a Bank of the United States (several -- oligopolies have more power and more mathematical
and psychological ability to bleed the electorate than just one monopoly has) and repeal the New Deal in the
form of the Glass Steagall act, which Obama's chief financial advisors (Austin Goolsbee and Larry Summers)
are big fans of the repeal of the New Deal under Clinton, as reported in NPR's This American Life by one
of Larry Summers' deputies who opposed the repeal of Glass-Steagall.

[Leopolds Ghost]

59. In the Washington Post Business Section on Wachovia's unexpected (and totally downplayed) collapse

It was revealed in the below-the-fold article on this major development
(always a sign that news is being suppressed by the Post) that the Feds
wanted this to happen and are now encouraging the small-to-mid-size
banks to collapse so they can be bought out by the big, Republican allied
Wall Street firms like Citibank and Bank of America that now control
3/4 of the American economy in the hands of a few grotesque corporations
that have more power than God does (literally) in American society.

What Citibank or Bank of America wants, they get. Period.

[gopbuster]

64. The problems at Wachovia were not totally "unexpected"

The problem mainly the failure of a CEO who had made some bad investments, mainly buying a California based mortgage lender (Golden West) that was bleeding money due to the declines in real estate market. As early as Oct of last year WB was a $50 stock until the problems started showing up, losses were mounting. By June of this year the stock was beaten down to around $10 and it's financials were deteriorating even worse. The 80% loss in stock market capitalization I'm sure had much to do with it's ability to borrow as it kicked up it's capital and asset/debt ratios. It was ripe for take over and there was already talk that Wells Fargo or Chase might pick it up.

This is the way the game is played

[PBS Poll-435]

65. You are right. Seriously.

If you have the time, go here

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4176023&mesg_id=4176023