Fizzly Bear

From The Swamp at the Baltimore Sun:

President Bush said some very nice things about the Federal Reserve’s rescue, once removed, of Bear Stearns, the wobbly investment bank.

“… We’ve taken strong and decisive action,” Bush said. “The Federal Reserve has moved quickly to bring order to financial markets. Secretary (Henry) Paulson is supportive of that action, as am I,” said Bush, referring to the Treasury Secretary.

Not everyone is joining Bush in singing the Fed’s praises. Some say the central bank’s actions violate notions of fairness. Why is a large investment bank rescued while homeowners are left to the rough justice of foreclosure and bankruptcy?


Original DVD cover.

Then there’s the criticism that not allowing Bear Stearns to fail will only make it easier for other Wall Street companies to take other risks and hope to be saved from their misjudgments by the federales.

From the Wall Street Journal:

The past six days have shaken American capitalism.

Between Tuesday, when financial markets began turning against Bear Stearns Cos., and Sunday night, when the bank disappeared into the arms of J.P. Morgan Chase & Co., Washington policy makers, federal regulators and Wall Street bankers struggled to keep the trouble from tanking financial markets and exacerbating the country’s deep economic uncertainty.

The mood changed daily, as did the apparent scope of the problem. On Friday, Treasury Secretary Henry Paulson thought markets would be calmed by the announcement that the Federal Reserve had agreed to help bail out Bear Stearns. President Bush gave a reassuring speech that day about the fundamental soundness of the U.S. economy. By Saturday, however, Mr. Paulson had become convinced that a definitive agreement to sell Bear Stearns had to be inked before markets opened yesterday.

Bear Stearns’s board of directors was whipsawed by the rapidly unfolding events, in particular by the pressure from Washington to clinch a deal, says one person familiar with their deliberations.

“We thought they gave us 28 days,” this person says, in reference to the terms of the Fed’s bailout financing. “Then they gave us 24 hours.”

In the end, Washington more or less threw its rule book out the window. The Fed, which has been at the forefront of the government response, made a number of unprecedented moves. Among other things, it agreed to temporarily remove from circulation a big chunk of difficult-to-trade securities and to offer direct loans to Wall Street investment banks for the first time.

The terms of the Bear Stearns sale contained some highly unusual features. For one, J.P. Morgan retains the option to purchase Bear’s valuable headquarters building in midtown Manhattan, even if Bear’s board recommends a rival offer. Also, the Fed has taken responsibility for $30 billion in hard-to-trade securities on Bear Stearns’s books, with potential for both profit and loss.

…snip…

At 5 a.m. Friday, [Federal Reserve Bank of New York President Timothy] Geithner, Mr. Paulson and Federal Reserve Chairman Ben Bernanke, calling in from home, joined a conference call to debate whether Bear should be allowed to fail or whether the Fed should lend it enough money to get through the weekend. At 7 a.m. they settled on the lifeline option. Mr. Bernanke assembled the Fed’s other three available governors to vote for the loan, the first time since the Depression the Fed would use its extraordinary authority to lend to nonbanks.

Treasury Secretary Paulson knew that the day’s work wouldn’t be enough to keep Bear afloat over the long term. Still, Mr. Paulson, a former Goldman Sachs chief executive and the administration’s point man for financial markets, thought Bear Stearns would survive through the weekend.

Saturday

That illusion was shattered Saturday morning, when Mr. Paulson was deluged by calls to his home from bank chief executives. They told him they worried the run on Bear would spread to other financial institutions. After several such calls, Mr. Paulson realized the Fed and Treasury had to get the J.P. Morgan deal done before the markets in Asia opened on late Sunday, New York time.

…snip…

Sunday

…snip…

Mr. Paulson was frequently on the phone with Bear and J. P. Morgan executives, negotiating the details of the deal, the senior Treasury official said. Initially, Morgan wanted to pick off select parts of Bear, but Mr. Paulson insisted that it take the entire Bear portfolio, the official said.

…snip…

This was no normal negotiation, says one person involved in the matter. Instead of two parties, there were three, this person explains, the third being the government. It is unclear what explicit requests were made by the Fed or Treasury. But the deal now in place has a number of features that are highly unusual, according to people who worked on the transaction.

…snip…

The Fed spent the weekend putting together a plan to be announced Sunday evening, regardless of the outcome of Bear’s negotiations, that would enable all Wall Street banks to borrow from the central bank. Mr. Bernanke called the Fed’s five governors together for a vote Sunday afternoon. All five voted in favor, using for the second time since Friday the Fed’s authority to lend to nonbanks.

The steps were announced at the same time the Fed agreed to lend $30 billion to J.P. Morgan to complete its acquisition of Bear Stearns. The loans will be secured solely by difficult-to-value assets inherited from Bear Stearns. If the assets decline in value, the Fed — and therefore the U.S. taxpayer — will bear the cost.

16 Comments

Filed under Ben Bernanke, Chimpy, George W. Bush, humor, movies, parody, politics, snark, Wordpress Political Blogs

16 responses to “Fizzly Bear

  1. grievanceproject

    The only thing I know for sure is that I don’t trust anything that any of them say.

    E.M.

  2. nonnie9999

    you can say that again, em! i don’t trust any of them and would feel far more secure if my money was under my mattress. oh wait! i don’t have any money!! and, if this economy keeps going the way it’s going, i will have to sell the mattress. 🙄

  3. nonnie9999

    remember, kids, it’s wednesday, so there’s more over at american street!

  4. in2thefray

    @2 bucks a share I don’t think decline is an option.It’s a gurantee not a loan tw but has the same dangers you’ve noted. I would add this though. Maybe we the US taxpayer should get the French taxpayer to dime in (Euro in ?) You see if the Bear Stearns portfolio tanks France and possibly the German economy will accelerate their tail spins also. nonnie+tax refund+1 800 dial-a-mattress= a great nights sleep.

  5. Friend of the court

    I just got back from putting my pay cheque in the BofA. I declined a credit offer at the window and the teller turned around and told the clerk, behind him, to call the manager. The teller wouldn’t hand me the deposit slip, even though I was standing there with my hand out. All three of them were at the counter, while I kept saying that I didn’t want a card and answering questions from the manager, which, driving home, made me real pissed that I had said anything but, I was caught off guard.
    Finally, the manager tells the teller, “enter declined”. Now I am wondering if it will show up in the F’ing bank’s, F’ing system, that they had declined a request, for credit, from me? There was hardly anyone at the bank and there was an extra security guard outside.
    OT, I stopped at a low end mall shoe store, on the way home. There is a hole in the bottom of my left work shoe and it might rain next week. Anyway, the only other person there, not counting employees, was asking for a job. Maybe, people don’t buy Easter Shoes, like they used to.

  6. in2thefray

    FOTC If I may . I think what you encountered is an example of stupid employees.The thought of bankers=prestige etc is well gone by. The online banking system of BoA always asks /offers you credit. It’s always a click no for me personally. Anyway what I’m trying to offer is calm for you. The offer by them and your decline shouldn’t be something that hits your credit rating.

  7. Friend of the court

    Well, I watched an old ‘Frontline’, last night so I was a little nervouser than usual. I have no credit debt, because I am cheap and my dad always said, “pay cash now or wait ’til jou can”. His family lost a farm in Nebraska, when he was a boy. That show, on PBS, was a real eye opener. Having no credit debt is, probably, worse for my credit rating than a turn down but, I am able to save a little, this way. The people on the show, had no idea how much it costs them to use “plastic”. I think that a big effort should be made, in our schools, to educate consummers. Too, many are being victimized into paying for years for things, that in many cases, are gone in a season.

  8. in2thefray

    Very true FOTC. The other thing people often are not aware of is excess active applications hurt you. It’s a big thing when you apply for a mortgage sometimes especially if you use something lie lending tree. Your credit report starts to show all these hits and all most people think they did was “click”. Take Care

  9. nonnie9999

    hi fotc and i2tf! 😀
    a long time ago, i worked in the installment loan department of a bank, ran credit reports a lot, read them, and i couldn’t tell you how they come up with their numbers. they have a secret formula.
    i agree with 12tf that you have nothing to worry about as far as the moron teller in the bank goes. they probably just have an internal list as part of a marketing survey to see what kind of customer responds positively to their marketing ploy. i doubt it will show up on your credit report. if you want, make a note of the date, get a copy of your credit report (you can get it for free once a year), and see if it shows up.
    i have said for years and years that they should teach life skills, such as balancing a checkbook and learning how to manage credit, in high school. it doesn’t even have to be graded. kids need to know how to exist in a world without mommy or daddy telling them how to do these things.

  10. Friend of the court

    It looks like a lot of mommies and daddies don’t know how to manage credit, either. When Fred was little, he wanted a toy at the store and I was short of funds. I told him that I didn’t have the money and he said, “write a check”. He was only about six but, we had a talk on the way home, about how you need money to write checks. I don’t know why but, some people seem reluctant to talk about money with their kids. I always thought that, if I didn’t, someone else would. Finance is not something that kids should learn on the street corner.

  11. nonnie9999

    fotc,
    my son said the same to me when he was little, but with a small twist–he told me to go to the atm.
    i think that a lot of people get into trouble financially, because they are embarrassed to ask questions. they really don’t understand the financial world (i am pleading guilty!), so they depend on brokers. i sometimes get the feeling that those they are depending on are not too sure about how things work either. it’s like calling the irs and realizing that the people who work there don’t understand the tax code either.

  12. Friend of the court

    The tax code isn’t that tuff. It’s a big fat book but, the part that applies to a specific question is usually only a sentence or three.
    The problem is that it gets changed all the time. The IRS is getting subcontracted out and uses part time help so it is hard to get ahold of anybody who knows what they are talking about. The joys of privitization.

  13. Friend of the court

    I haven’t seen Gotta around anywhere. I hope she’s ok.

  14. nonnie9999

    fotc,
    the tax code is to the point where the people who write it have no idea what’s in there. a normal tax return is not that difficult, but once you get into anything out of the ordinary, it’s ridiculous. the other day, i went to the irs website to file online. you had to go through a million links just to get to a simple form, and then it told you that you have to go through one of their selected private firms.

  15. nonnie9999

    oops,
    forgot to add, gotta is okay. she is taking care of her sister, and i would imagine that she is quite busy.

  16. Pingback: Oh Henry! « HYSTERICAL RAISINS

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