First bank failure coming?

edited March 2008 in The Economy
More to come....

But WM could never ever fail. It in the city with lakes, mountains, ponies, etc....

http://www.bloomberg.com/apps/news?pid= ... =worldwide

Comments

  • Color me delusional, but I actually just bought small positions in Bear today and WaMu. Bear is in a desperate position, and the investment is risky, but I don't think they'll outright fail. They'll likely get bought out and the bank that buys them will make out like bandits. Just like how everyone was overly exuberant a year ago, I think they're overly in fear now.
  • Chris wrote:
    Color me delusional, but I actually just bought small positions in Bear today and WaMu.
    delusionaluy8.png

    Which shade do you prefer?
  • Pink, of course. It will match my pony.
  • My question is, why the hell would JP Morgan want a piece of BSC right now? They are totally illiquid and really offer very little to JPM that they don't already have.

    BSC is going under, the only question is what will they look like come Monday? Will they be bought out, dismantled, or just toast? Looks like the Fed is trying its best to prevent the latter, but I wouldn't put any bets on the table either way. There are much better/safer places to short right now.
  • Matthew wrote:
    My question is, why the hell would JP Morgan want a piece of BSC right now? They are totally illiquid and really offer very little to JPM that they don't already have.

    BSC is going under, the only question is what will they look like come Monday? Will they be bought out, dismantled, or just toast? Looks like the Fed is trying its best to prevent the latter, but I wouldn't put any bets on the table either way. There are much better/safer places to short right now.


    I've been asking the same question about why in the hell BAC (Bank of America) would want CFC (Countrywide)!
  • I don't think Morgan gets anything from Bear. They were just a conduit. Why they need a conduit, I'm not sure.
  • edited March 2008
    Bili,

    They are a conduit for BSC to access the discount window today (they can't access the discount window because they are not a bank but a broker, same reason CFC was unable to access the discount window). However, the current rumor is that JPM is going to purchase BSC outright come Monday.
  • David,

    The main difference I see between the CFC + BofA transaction is that BofA wants CFC's mortgage servicing arm. They already invested a couple of billion into CFC (when the stock was around 18 bucks) so they were somewhat already "pot committed".

    BSC on the other hand is merely a broker. I think this is rumor mongering at its best, first it was JPM buying out WAMU, now supposedly they are going to buy out JPM. I'll believe it when I see it, otherwise I am cashing out my 55 BSC puts at 400 percent profit and calling it a week. I'm taking all my money off the table at this point and watching from the sidelines.
  • BTW, I still see the CFC BofA deal falling through and CFC becoming a zero.
  • http://biz.yahoo.com/ap/080316/jpmorgan ... earns.html

    OMFG! They were around 60 bucks a share just 3 days ago!
  • Who was the idiot saying people should short CFC????? My goodness, Bear Stearns is off the charts... that buy out is less than two cents on the dollar for an investment last summer. $10,000 last summer is now worth $133.... Please, someone tell me my math is wrong.
  • Matthew... I think you are doing a bit better than 400% now....
  • I think this quote from the AP says it all:

    "Wall Street begins the new week trying to come to terms with just how bad the fallout from the credit crisis is -- so bad that an investment bank worth $20 billion weeks ago has been bought for just $236 million."

    Why can't WM fail again? I think I'm going to buy some more puts in the morning.
  • Chris- i hope you didn't buy a lot of Bear Sterns Friday, 'cause it's gone now.

    Here's the real kicker guys- now EVERYBODY knows how much the CDO, etc. garbage is worth if it's on your books, and leveraged even a bit. The leverage, times the default rate, means you're gone. One large financial institution after another will be falling off the cliff as the margin calls and redemptions come in this week. I've read that there are about a dozen large institutions with significant positions in Bear Sterns alone. They will be hammered by this development.
  • Mr. Scotsman, (of course these are all 12/31/07 numbers, so they have already recorded some of the loss in the investment, but Morgan Stanley can't like a 560 million loss in one quarter...

    From Yahoo (major holders in Bear Stearns):

    BARROW, HANLEY MEWHINNEY & STRAUSS, INC. 11,485,058 9.73 $1,013,556,368 31-Dec-07
    MORGAN STANLEY 6,335,729 5.37 $559,128,084 31-Dec-07
    Legg Mason Capital Management, Inc. 5,721,010 4.84 $504,879,132 31-Dec-07
    PRIVATE CAPITAL MANAGEMENT, INC. 5,541,259 4.69 $489,016,106 31-Dec-07
    Barclays Global Investors UK Holdings Ltd 4,245,451 3.60 $374,661,050 31-Dec-07
    STATE STREET CORPORATION 3,550,715 3.01 $313,350,598 31-Dec-07
    VANGUARD GROUP, INC. (THE) 3,149,691 2.67 $277,960,230 31-Dec-07
    JANUS CAPITAL MANAGEMENT, LLC 2,765,699 2.34 $244,072,936 31-Dec-07
    FMR LLC 2,359,011 2.00 $208,182,720 31-Dec-07
    PUTNAM INVESTMENT MANAGEMENT, LLC 2,242,980 1.90 $197,942,985 31-Dec-07
  • I flushed about $250. So, yeah. AWESOME! Small fry compared to the guys like Joe Lewis that have lost a billion. This is a very expensive lesson in falling knives.

    I should stop Ass-u-me-ing... BUT... I think Scottsman is right that the leverage at Bear was severe (compounded by severe fear) which drives the liquidity of their securities down. As one guy said in a WSJ clip, I can't believe JPM got enough due dilligence done in 3 days. I think the $2 reflects this uncertainty and that shareholders are going to demand more (as reflected in the stock price). At this point with 85% accounted as entropy I might as well ride it out considering how much my trading fees would cost me now.
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