What's even more amazing is that they are one of the oldest investment banks in the country, survived the Great Depression, several recessions, and several wars. Makes ya think....
I like Jim Cramer; he's entertaining..But like many weather forecasters, he's wrong an awful lot.
And like other stock analysts ( and weather forecasters), they just keep trottin him back out to make more wrong predictions.
I like Jim Cramer; he's entertaining..But like many weather forecasters, he's wrong an awful lot.
And like other stock analysts ( and weather forecasters), they just keep trottin him back out to make more wrong predictions.
If you go the the Bear Stearns Yahoo Finance board, you will see that a lot of people are calling for Cramer's head because his recommendation was to buy BSC heavily on Friday. Those folks have lost out on a LOT of money. Personally, I think that most of the "analysts" on CNBC are blowhards who don't have a clue, but I did hear some hilarious stuff this morning while I was driving in to work. Some guy, can't remember who it was, but I think he was another financial analyst, was saying that 2 bucks a share severely undervalues Bear Stearns and that it is an excellent buying opportunity. Mark Haines then said "You didn't just say that. You're not really serious are you? You've got to be kidding!". Then he went on to say that one should be buying real estate right now too!!!
Some guy, can't remember who it was, but I think he was another financial analyst, was saying that 2 bucks a share severely undervalues Bear Stearns and that it is an excellent buying opportunity.
Well, that's probably sort of true. JP is probably making a good purchase at that price. So if it's a great price, I'd say you're probably better off buying JP than BSC.
Some guy, can't remember who it was, but I think he was another financial analyst, was saying that 2 bucks a share severely undervalues Bear Stearns and that it is an excellent buying opportunity.
Well, that's probably sort of true. JP is probably making a good purchase at that price. So if it's a great price, I'd say you're probably better off buying JP than BSC.
That sounded too realtorish though. Excellent buying opportunity. ;-)
JPM paid $2 a share - but also got a $30B guarantee by the fed for the "most illiquid" (aka "crappiest") assets. So they basically paid -$29.6B for an investment bank, and got a $1.2B piece of prime Manhattan real estate in the process. The deal was done under duress from the Fed/Treasury. BSC had very little room to negotiate.
I suspect that this will turn out to be quite a windfall for JPM in the long run.
You know that joke about two bald guys putting their heads together and making a complete @ss? Think Bernanke and Paulson.
JPM paid $2 a share - but also got a $30B guarantee by the fed for the "most illiquid" (aka "crappiest") assets. So they basically paid -$29.6B for an investment bank, and got a $1.2B piece of prime Manhattan real estate in the process. The deal was done under duress from the Fed/Treasury. BSC had very little room to negotiate.
I suspect that this will turn out to be quite a windfall for JPM in the long run.
You know that joke about two bald guys putting their heads together and making a complete @ss? Think Bernanke and Paulson.
No I don't know that joke...
And the top part is why if you want to buy into this, buy JP...don't buy BSC. Better yet, don't buy anything yet.
JPMorgan Chase & Co. surged in New York trading after striking a deal backed by the Federal Reserve to buy Bear Stearns Cos. for $2 a share, 90 percent less than the 85-year old firm's market value last week......
.....JPMorgan Chief Executive Officer Jamie Dimon bought Bear Stearns, once the biggest underwriter of U.S. mortgage bonds, for less than the value of its real estate after clients, alarmed by speculation about a cash shortage, withdrew $17 billion in two days. Faced with the prospect of bankruptcy, Bear Stearns CEO Alan Schwartz was forced to accept the deal less than five days after he assured investors that the company's ``liquidity cushion'' was sufficient to weather credit-market losses.....
......Sanford C. Bernstein analyst Brad Hintz estimated that the breakup value of Bear Stearns was at least $7.7 billion. Even taking into account JPMorgan's estimated $6 billion of merger costs, the price paid for Bear Stearns is a ``tremendous bargain for JPMorgan shareholders,'' Hintz said in a report today.
``Bear Stearns shareholders are at the short end of the stick,'' said David Hendler, an analyst at New York-based CreditSights Inc. ``This was done in the market's best interests. They had to get this done or they would risk runs on other companies.'' ....
.....Without a resolution this weekend, Bear Stearns's situation would have continued to deteriorate when markets resumed trading today, according to analysts and investors. Yet the value placed on the company, whose shares closed as high as $158.39 last April, raised questions about share prices for the rest of Wall Street.
``This is a serious crisis,'' said David Goldman, portfolio strategist at Asteri Capital in New York and former head of debt research at Bank of America Corp., the biggest U.S. bank by market value.
``For Bear's stock price to go to effectively zero, contrary to market expectations, even at the close on Friday, tells us that something is systemically very wrong and we're at a very dangerous moment,'' Goldman said. If a sale hadn't been announced, Bear Stearns, which employs about 14,000 people, probably couldn't open its doors for trading, he said.
Founded in 1923, Bear Stearns survived the Great Depression and first sold shares to the public in 1985, under then-CEO Alan ``Ace'' Greenberg. Today's fire-sale to JPMorgan caps an eight- month slide in the company's fortunes that began last July with the collapse of two of its hedge funds, which invested in securities linked to subprime mortgages. ....
......Schwartz, an executive with more than 30 years of experience at Bear Stearns, became CEO less than three months ago, as the hand-picked choice of his predecessor, James ``Jimmy'' Cayne, 74.
Cayne, who remains non-executive chairman, stepped down after reporting an $854 million fourth-quarter loss, the first in the company's history. He was at a bridge tournament in Detroit last week as speculation about the firm's cash position pummeled the stock.
Cayne ranked as Wall Street's richest CEO, with $1.3 billion of assets, according to Forbes magazine's 2007 billionaire survey. His stake in the firm approached $1 billion last year when the shares reached their peak price of $170. Under terms of the JPMorgan takeover, his holdings are now worth about $12 million.
Joseph Lewis, Bear Stearns's second-largest shareholder, has spent more than $1 billion on the firm's stock since September, paying as much as $150 a share. Lewis, a 71-year-old billionaire, wasn't planning to reduce his stake, a person close to him said March 11. He's now entitled to $22 million of JPMorgan shares....
....To see a situation involving a bailout lead to shareholders getting pretty much wiped out is a pretty significant event for the market,'' said Ben Wallace, who helps manage $800 million, including stock in JPMorgan, for Grimes & Co. in Westborough, Massachusetts. ``It's going to raise concerns'' about the value of financial stocks, he said.
The Fed's attempt to rescue Bear Stearns last week with a cash infusion failed to avert a crisis of confidence among the company's customers and shareholders, who drove the stock down a record 47 percent on March 14, when the emergency funding was announced.
Bear Stearns's profit exceeded $2 billion in 2006, yet the price JPMorgan is paying is about one quarter the value of the securities firm's headquarters building in midtown Manhattan. The 1.2 million-square-foot, 45-story structure built in 2001 is worth about $1.2 billion, based on the average $1,000 per- square-foot that comparable office space in the city is currently fetching....
.....JPMorgan Chief Financial Officer Mike Cavanagh said on a conference call after the sale was announced that the bank was comfortable with the values Bear Stearns had assigned to the mortgage-related assets on its books. Asked to explain why JPMorgan was paying about $2 a share for a company with a book value -- assets minus liabilities -- of $84 a share, Cavanagh said the price reflected the risk the firm was taking.
It ``gives us the flexibility and margin of error that's appropriate given the speed at which the transaction came together,'' he said. JPMorgan said it was confident Bear Stearns shareholders would approve the sale.....
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Thru shear coincidence and lack of timely portfolio maintenance, I am the proud owner of 165 shares of JPM. I had made up my mind to get totally out of the financial sector, but I never followed thru. I think I will hold on to them now as JPM is up 10.32% today.
Hooray for procrastination!
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With respect to the next bank disaster - LEH down 19.13% today.
....With Bear Stearns seemingly gone, investors pondered who might be next. Lehman Brothers Holding Inc. stock fell more than 34 percent Monday, following a 15 percent drop on Friday amid concerns it might be facing similar liquidity issues. Lehman Chief Executive Richard Fuld denied Monday that the firm was having such problems......
Lehman Brothers Holdings Inc.(LEH) has taken to the bully pulpit to assure the market that it's not Bear Stearns Cos. (BSC) and that it's not having trouble funding its businesses.
The jury is out on whether it's working.
Lehman is larger and more diversified by product and geography than Bear, but it's vulnerable to Bear-like comparisons because of its massive concentration of mortgages and mortgage securities.
In a sign of how precarious things are, Lehman - Wall Street's fourth-largest investment bank - is relying on the federal government to convey its message of stability and liquidity to counterparties, clients and investors. Specifically, it cited the Federal Reserve Board's unprecedented decision to let brokers borrow from the government at the same low rate as insured banks as a reassuring sign.
Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, said its access to cash is ``very strong'' as the shares fell 28 percent in early trading....
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Laughable post on the RE Pro Blog at the Seattle PI by Kary...
"If six months ago I'd posted something critical of some expert at Bear Stearns, the response from the bubble bloogers would have been: "Do you know who they are?""
I would reckon that had he said something critical of BSC the bubble bloggers would instead have said something along the lines of..."Oh...yeah...we know that...that's why so many here have made a nice profit with their shorts and puts."
Not to mention that this thread is more than 6 months old.
Bailing out Bear Stearns Cos. won't address the falling home prices and tide of foreclosures that will continue to plague the economy, some observers said Monday.
Consumers remain in an environment where nothing substantial has been done to prevent foreclosures, said Jim Carr, chief operating officer of the National Community Reinvestment Coalition. The Bear Stearns deal highlights the need for faster action on legislation to enable the widespread modification of bad loans, consumer advocates say, and the importance of improving related asset quality.
"It's almost stunning to witness the shoring up of a major financial institution, but not addressing the problem that the quality of housing assets is deteriorating with each minute we wait," Carr said.
Kurt Eggert, a law professor at Chapman University's School of Law in Orange, Calif., and a former member of the Fed's consumer advisory council, said the Bear deal shows the "growing disconnect between the Bush administration's willingness to help Wall Street and its willingness to aid the homeowners facing foreclosure."
A plan to reduce foreclosures should be the top priority, he said, as defaults and foreclosures have been at the root of the subprime crisis.
"Of all the investment houses, Bear Stearns was the one most deserving of going under because of the subprime crisis, both for its ownership of a subprime lender and its work packaging those loans," Eggert said. "However, the Feds are doing more to help Bear Stearns than the borrowers facing foreclosure because of Bear Stearns actions." .......
.....Dean Baker, co-director of the Center for Economic and Policy Research, said a number of proposals that are geared toward helping homeowners facing foreclosure will actually benefit banks and other holders of bad mortgage debt -- institutions that could "earn tens of billions of dollars at taxpayer expense." He added that owning can be much more expensive than renting.
"It's really infuriating for me that we pushed low- and moderate-income people to buy overpriced houses with really bad mortgages," he said. "And even now, after it's proven so disastrous, you have politicians that still can't take two minutes and think for a second that maybe it's not a good idea for everyone to be homeowner regardless of what price they're buying at."
And what will probably become one of my all time favorite quotes ----
A bit off topic, but worth noting: Former Fed Chairman Paul Volcker (pictured) is raising questions about the Fed's rescue of Bear Stearns.
Volcker's chief questions: Why is the Fed rescuing a non-bank that it does not regulate? Isn't that a job for Congress? Why is the Fed guaranteeing bad loans? The Fed regulates -- and lends to -- banks, not investment houses......
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Bear bailout not as bad as the alternative
We are now in the bailout business.
Like it or not, the Federal Reserve's bailout of Bear Stearns last weekend means that we taxpayers will once again step in to save bankers from themselves.
We may not mind seeing one of Wall Street's prime peddlers of subprime debt get its comeuppance, but the price is simply more than the public can afford.....
......In all likelihood, though, the Fed, and by extension taxpayers, will eat about $30 billion in bad debt......
......To allow Bear to fail would be to bring justice to the mortgage meltdown. It would teach the banks a lesson, and bring the consequences of poor risk assessment to Bear.
Yet the moral satisfaction comes at a steep price. Bear's collapse would have unleashed a flood of toxic debt into the jittery market.
That would have triggered furthering tightening of credit and restrictions on liquidity at a time when the market is already gasping.
It could have exacerbated the economic slowdown already under way by eroding even further the confidence of world markets in our financial system.
So Bear is spared the ultimate consequence so that the rest of us can be spared the repercussions from it......
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So Bear is spared the ultimate consequence so that the rest of us can be spared the repercussions from it......
I don't know if I agree. Bear Stearns is essentially gone. The owners lost, the management loses. At least half the employees will be gone sometime this year. And I think the other banks noticed what can happen.
Congress is looking into the Federal Reserve-backed agreement to sell Bear Stearns to J.P. Morgan Chase, examining the deal to see whether it complied with federal regulations and seeking to determine taxpayer exposure, The Wall Street Journal reported Thursday.
....Many investors have cried foul at that sale price ($2 a share), saying even if Bear was facing bankruptcy, its headquarters in New York City alone were worth far more than the $237 million takeout value.
Stunned Bear Stearns shareholders who saw investments virtually wiped out overnight when a takeover deal with JPMorgan Chase was unveiled are demanding to know how it was put together in the first place....... Bear Stearns Sued by Pensioners Over JPMorgan Offer
Bear Stearns Cos., the troubled brokerage whose stock has fallen more than 90 percent this year, was sued by a pension fund asking a judge to halt a planned buyout for $2.32 a share by JPMorgan Chase & Co.... Bear Stearns Prepares To Lawyer Up
....Bear Stearns didn't die. It was killed. And lack of credible information about its situation contributed to its speedy demise. It was a tragedy, by all accounts. Thousands of victims sacrificed for the greed of a few.....
Did JPMorgan Chase get snagged in a legal loophole?
A careful read of its guaranty agreement with Bear Stearns, part of its deal to acquire the troubled investment bank, suggests that the agreement may be much broader than JPMorgan intended. This apparent oversight likely played a role in JPMorgan's decision over the weekend to consider raising its offer for Bear.
Under the merger agreement, if Bear's shareholders vote down the takeover deal for a year, Bear can terminate the agreement. This we already knew. But it also appears that, in such circumstances, JPMorgan's guarantee to backstop Bear's liabilities stays in place — forever...... Analyst: JPMorgan Will Pay About $65 per Share for Bear Stearns
JPMorgan Chase & Co. will end up paying about $65 per share for Bear Stearns Companies Inc., too high a price for a "deeply troubled company," a Punk, Ziegel & Co. analyst said Tuesday.......
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Behind the Deal, the Hand of the Fed
.......In case there is any confusion about who was pulling the strings behind the scenes of JPMorgan Chase's acquisition of Bear Stearns, the curtain was lifted Monday. By raising its bid — with the grudging approval of the Fed — to $10 a share, from $2, JPMorgan exposed what had long been whispered about but no one dared to say aloud: the Fed is officially in the deal-making business........
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From unknown source, but funny enough to repeat -
The Senate Finance Committee's Chuck Grassley wants to know how Bear Stearns insiders are being treated under the deal with JPMorgan Chase -- specifically whether they'll come out better than if Bear Stearns had gone into bankruptcy. A Bear Stearns spokesman said, "Duh -- yeah."
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Bear Stearns Cos shares fell nearly 5 percent on Friday after Chairman James Cayne, who was seen as opposing JPMorgan Chase & Co's acquisition of the investment bank, sold his stock.
"It is symbolic that he's selling," said David Dreman, chief investment officer of Dreman Value Management LLC, a New Jersey based fund manager that has over $18 billion under management. "It lessens the potential enormously for a long drawn out battle.".....
.....The sale of the shares, which were worth about $1 billion last year when the stock peaked at over $170 a share, were sold for $61 million........
Apparently being short on Bear didn't work for some.
Long-short equity hedge funds are set to post poor performance for March as the bailout of Bear Stearns and commodity price falls hit recently profitable trades, according to HSBC Alternative Investments.
Many hedge funds have been short the financials sector since the credit crisis began last summer and some banks started revealing large writedowns related to the subprime mortgage meltdown.
However, that short trade turned sour last week after JPMorgan agreed to buy troubled investment bank Bear Stearns and the U.S. Federal Reserve agreed to take control of a $30 billion (15 billion pound) portfolio of Bear Stearns assets......
Whoa Marc! You're being so harsh!
It took Netscape founder Marc Andreessen to point out that U.S. taxpayers are footing the bill for Bear Stearns chairman Jimmy Caynes's pot-smoking, bridge-playing lifestyle.
Caynes netted $60.1 million in cash this week by dumping his entire stake in the foundering firm at $10.84 a share.
The Bear Stearns bailout deal includes a $29 billion loan guarantee from the federal government to help cover Bear's crummy subprime mortgage-based investments. Andreessen, who is turning out to be a hardheaded and opinionated market commentator as well as a highly successful tech entrepreneur (Netscape, Opsware, Ning), explains the implications:
Without that $29 billion of taxpayer money, Jimmy Cayne's stock would be worth $0/share, and if you multiply that by 5.66 million shares, the total would be $0. ...
It is virtually certain that taxpayers are going to take some loss on that $29 billion loan.
When we do, we will have the immense satisfaction of knowing that the first $61.3 million of those losses represent a direct cash transfer from US taxpayers to Jimmy Cayne....
Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.......
......Volcker, the Fed chairman from 1979 to 1987, had implicit criticism for U.S. regulators and market participants who allowed ``excesses of subprime mortgages'' to spread into ``the mother of all crises.'' The Fed's Bear Stearns loan was unusual, he said.....
......"The extension of lending directly to non-banking financial institutions -- while under the authority of nominally `temporary' emergency powers -- will surely be interpreted as an implied promise of similar action in times of future turmoil,'' he said.
Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''....
....."The implications of these decisions, and the lessons from the unfolding crisis itself, surely deserve full debate and legislative review in the period ahead,'' Volcker said...
.....Volcker, 80, said the problems stemmed in part from trading of increasing complicated securities including derivatives that ``have taking on a trading life of their own,'' and said the turmoil ``adds up to a clarion call for an effective response.''
"There was no pressure for change, not in Washington which was spending money and keeping taxes low, not on Wall Street which was wallowing in money, not on Main Street with individuals enjoying easy credit and rising house prices,'' Volcker said.
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June 19 (Bloomberg) -- Bear Stearns Cos. former hedge fund managers Ralph Cioffi and Matthew Tannin were taken into custody at their homes this morning by FBI agents over their roles in the collapse of two funds that ignited the subprime mortgage crisis last year.
The arrests are the first from a federal probe of possible fraud by banks and mortgage firms whose investments in subprime loans and securities plunged in value, causing losses that now total $396.6 billion. The U.S. Securities and Exchange Commission may sue the two men as early as today, claiming they committed fraud by falsely telling investors the funds they managed were sound, people with knowledge of the case said....
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June 19 (Bloomberg) -- Bear Stearns Cos. former hedge fund managers Ralph Cioffi and Matthew Tannin were taken into custody at their homes this morning by FBI agents over their roles in the collapse of two funds that ignited the subprime mortgage crisis last year.
The arrests are the first from a federal probe of possible fraud by banks and mortgage firms whose investments in subprime loans and securities plunged in value, causing losses that now total $396.6 billion. The U.S. Securities and Exchange Commission may sue the two men as early as today, claiming they committed fraud by falsely telling investors the funds they managed were sound, people with knowledge of the case said....
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Hello, Mr. Cioffi. Welcome to your role as scapegoat for the credit crunch. These guys lost $1.6B. I read the other day that money-center banks had written down $107B of their $254B profits since 2004. And that is the stuff on their balance sheets - which I'd image these funds were not.
DJO -
I agree that Mr. Cioffi and Mr. Tannin are being made scapegoats. It's not like no other hedge fund managers or other investment managers jumped onto the sub-prime CDO market bandwagon on the way to fantastic riches. These two were just the most high profile. If this goes to trial, I do not see how it cannot get ugly for the whole mortgage industry.
Comments
BS sold @$2.00/share max. World (Asian) markets tumble. Sh!t hits fan big time
Monday, 3-17-08. BS provides the trigger, the beginning of the end.
Oh boy....
And like other stock analysts ( and weather forecasters), they just keep trottin him back out to make more wrong predictions.
If you go the the Bear Stearns Yahoo Finance board, you will see that a lot of people are calling for Cramer's head because his recommendation was to buy BSC heavily on Friday. Those folks have lost out on a LOT of money. Personally, I think that most of the "analysts" on CNBC are blowhards who don't have a clue, but I did hear some hilarious stuff this morning while I was driving in to work. Some guy, can't remember who it was, but I think he was another financial analyst, was saying that 2 bucks a share severely undervalues Bear Stearns and that it is an excellent buying opportunity. Mark Haines then said "You didn't just say that. You're not really serious are you? You've got to be kidding!". Then he went on to say that one should be buying real estate right now too!!!
:shock:
Well, that's probably sort of true. JP is probably making a good purchase at that price. So if it's a great price, I'd say you're probably better off buying JP than BSC.
That sounded too realtorish though. Excellent buying opportunity. ;-)
At the bottom of the page..... related to Cramer's advise on 3/11/08...
I suspect that this will turn out to be quite a windfall for JPM in the long run.
You know that joke about two bald guys putting their heads together and making a complete @ss? Think Bernanke and Paulson.
No I don't know that joke...
And the top part is why if you want to buy into this, buy JP...don't buy BSC. Better yet, don't buy anything yet.
Wow! What else is there to say.
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JPMorgan Surges After Capturing Bear Stearns for $240 Million
JPMorgan Chase & Co. surged in New York trading after striking a deal backed by the Federal Reserve to buy Bear Stearns Cos. for $2 a share, 90 percent less than the 85-year old firm's market value last week......
.....JPMorgan Chief Executive Officer Jamie Dimon bought Bear Stearns, once the biggest underwriter of U.S. mortgage bonds, for less than the value of its real estate after clients, alarmed by speculation about a cash shortage, withdrew $17 billion in two days. Faced with the prospect of bankruptcy, Bear Stearns CEO Alan Schwartz was forced to accept the deal less than five days after he assured investors that the company's ``liquidity cushion'' was sufficient to weather credit-market losses.....
......Sanford C. Bernstein analyst Brad Hintz estimated that the breakup value of Bear Stearns was at least $7.7 billion. Even taking into account JPMorgan's estimated $6 billion of merger costs, the price paid for Bear Stearns is a ``tremendous bargain for JPMorgan shareholders,'' Hintz said in a report today.
``Bear Stearns shareholders are at the short end of the stick,'' said David Hendler, an analyst at New York-based CreditSights Inc. ``This was done in the market's best interests. They had to get this done or they would risk runs on other companies.'' ....
.....Without a resolution this weekend, Bear Stearns's situation would have continued to deteriorate when markets resumed trading today, according to analysts and investors. Yet the value placed on the company, whose shares closed as high as $158.39 last April, raised questions about share prices for the rest of Wall Street.
``This is a serious crisis,'' said David Goldman, portfolio strategist at Asteri Capital in New York and former head of debt research at Bank of America Corp., the biggest U.S. bank by market value.
``For Bear's stock price to go to effectively zero, contrary to market expectations, even at the close on Friday, tells us that something is systemically very wrong and we're at a very dangerous moment,'' Goldman said. If a sale hadn't been announced, Bear Stearns, which employs about 14,000 people, probably couldn't open its doors for trading, he said.
Founded in 1923, Bear Stearns survived the Great Depression and first sold shares to the public in 1985, under then-CEO Alan ``Ace'' Greenberg. Today's fire-sale to JPMorgan caps an eight- month slide in the company's fortunes that began last July with the collapse of two of its hedge funds, which invested in securities linked to subprime mortgages. ....
......Schwartz, an executive with more than 30 years of experience at Bear Stearns, became CEO less than three months ago, as the hand-picked choice of his predecessor, James ``Jimmy'' Cayne, 74.
Cayne, who remains non-executive chairman, stepped down after reporting an $854 million fourth-quarter loss, the first in the company's history. He was at a bridge tournament in Detroit last week as speculation about the firm's cash position pummeled the stock.
Cayne ranked as Wall Street's richest CEO, with $1.3 billion of assets, according to Forbes magazine's 2007 billionaire survey. His stake in the firm approached $1 billion last year when the shares reached their peak price of $170. Under terms of the JPMorgan takeover, his holdings are now worth about $12 million.
Joseph Lewis, Bear Stearns's second-largest shareholder, has spent more than $1 billion on the firm's stock since September, paying as much as $150 a share. Lewis, a 71-year-old billionaire, wasn't planning to reduce his stake, a person close to him said March 11. He's now entitled to $22 million of JPMorgan shares....
....To see a situation involving a bailout lead to shareholders getting pretty much wiped out is a pretty significant event for the market,'' said Ben Wallace, who helps manage $800 million, including stock in JPMorgan, for Grimes & Co. in Westborough, Massachusetts. ``It's going to raise concerns'' about the value of financial stocks, he said.
The Fed's attempt to rescue Bear Stearns last week with a cash infusion failed to avert a crisis of confidence among the company's customers and shareholders, who drove the stock down a record 47 percent on March 14, when the emergency funding was announced.
Bear Stearns's profit exceeded $2 billion in 2006, yet the price JPMorgan is paying is about one quarter the value of the securities firm's headquarters building in midtown Manhattan. The 1.2 million-square-foot, 45-story structure built in 2001 is worth about $1.2 billion, based on the average $1,000 per- square-foot that comparable office space in the city is currently fetching....
.....JPMorgan Chief Financial Officer Mike Cavanagh said on a conference call after the sale was announced that the bank was comfortable with the values Bear Stearns had assigned to the mortgage-related assets on its books. Asked to explain why JPMorgan was paying about $2 a share for a company with a book value -- assets minus liabilities -- of $84 a share, Cavanagh said the price reflected the risk the firm was taking.
It ``gives us the flexibility and margin of error that's appropriate given the speed at which the transaction came together,'' he said. JPMorgan said it was confident Bear Stearns shareholders would approve the sale.....
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Thru shear coincidence and lack of timely portfolio maintenance, I am the proud owner of 165 shares of JPM. I had made up my mind to get totally out of the financial sector, but I never followed thru. I think I will hold on to them now as JPM is up 10.32% today.
Hooray for procrastination!
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With respect to the next bank disaster - LEH down 19.13% today.
After Bear Stearns Rescue, Who's Next?
....With Bear Stearns seemingly gone, investors pondered who might be next. Lehman Brothers Holding Inc. stock fell more than 34 percent Monday, following a 15 percent drop on Friday amid concerns it might be facing similar liquidity issues. Lehman Chief Executive Richard Fuld denied Monday that the firm was having such problems......
Lehman, Others Defend Strength - With Fed Help
Lehman Brothers Holdings Inc.(LEH) has taken to the bully pulpit to assure the market that it's not Bear Stearns Cos. (BSC) and that it's not having trouble funding its businesses.
The jury is out on whether it's working.
Lehman is larger and more diversified by product and geography than Bear, but it's vulnerable to Bear-like comparisons because of its massive concentration of mortgages and mortgage securities.
In a sign of how precarious things are, Lehman - Wall Street's fourth-largest investment bank - is relying on the federal government to convey its message of stability and liquidity to counterparties, clients and investors. Specifically, it cited the Federal Reserve Board's unprecedented decision to let brokers borrow from the government at the same low rate as insured banks as a reassuring sign.
Lehman Brothers Too Big To Fail? Don't Count On It
Wall Street is in a full meltdown. Bear Stearns (BSC) is gone, so the markets are wondering who's next. The leading contender? Lehman Brothers...
Lehman Says Its Liquidity Is `Very Strong' as Shares Decline
Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, said its access to cash is ``very strong'' as the shares fell 28 percent in early trading....
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"If six months ago I'd posted something critical of some expert at Bear Stearns, the response from the bubble bloogers would have been: "Do you know who they are?""
I would reckon that had he said something critical of BSC the bubble bloggers would instead have said something along the lines of..."Oh...yeah...we know that...that's why so many here have made a nice profit with their shorts and puts."
Not to mention that this thread is more than 6 months old.
Homeowners need help, not Wall Street
Bailing out Bear Stearns Cos. won't address the falling home prices and tide of foreclosures that will continue to plague the economy, some observers said Monday.
Consumers remain in an environment where nothing substantial has been done to prevent foreclosures, said Jim Carr, chief operating officer of the National Community Reinvestment Coalition. The Bear Stearns deal highlights the need for faster action on legislation to enable the widespread modification of bad loans, consumer advocates say, and the importance of improving related asset quality.
"It's almost stunning to witness the shoring up of a major financial institution, but not addressing the problem that the quality of housing assets is deteriorating with each minute we wait," Carr said.
Kurt Eggert, a law professor at Chapman University's School of Law in Orange, Calif., and a former member of the Fed's consumer advisory council, said the Bear deal shows the "growing disconnect between the Bush administration's willingness to help Wall Street and its willingness to aid the homeowners facing foreclosure."
A plan to reduce foreclosures should be the top priority, he said, as defaults and foreclosures have been at the root of the subprime crisis.
"Of all the investment houses, Bear Stearns was the one most deserving of going under because of the subprime crisis, both for its ownership of a subprime lender and its work packaging those loans," Eggert said. "However, the Feds are doing more to help Bear Stearns than the borrowers facing foreclosure because of Bear Stearns actions." .......
.....Dean Baker, co-director of the Center for Economic and Policy Research, said a number of proposals that are geared toward helping homeowners facing foreclosure will actually benefit banks and other holders of bad mortgage debt -- institutions that could "earn tens of billions of dollars at taxpayer expense." He added that owning can be much more expensive than renting.
"It's really infuriating for me that we pushed low- and moderate-income people to buy overpriced houses with really bad mortgages," he said. "And even now, after it's proven so disastrous, you have politicians that still can't take two minutes and think for a second that maybe it's not a good idea for everyone to be homeowner regardless of what price they're buying at."
And what will probably become one of my all time favorite quotes ----
"He has no idea what's going on. Even by his standards, he's wrong."
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Volcker questions Fed's Bear Stearns bailout
A bit off topic, but worth noting: Former Fed Chairman Paul Volcker (pictured) is raising questions about the Fed's rescue of Bear Stearns.
Volcker's chief questions: Why is the Fed rescuing a non-bank that it does not regulate? Isn't that a job for Congress? Why is the Fed guaranteeing bad loans? The Fed regulates -- and lends to -- banks, not investment houses......
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Bear bailout not as bad as the alternative
We are now in the bailout business.
Like it or not, the Federal Reserve's bailout of Bear Stearns last weekend means that we taxpayers will once again step in to save bankers from themselves.
We may not mind seeing one of Wall Street's prime peddlers of subprime debt get its comeuppance, but the price is simply more than the public can afford.....
......In all likelihood, though, the Fed, and by extension taxpayers, will eat about $30 billion in bad debt......
......To allow Bear to fail would be to bring justice to the mortgage meltdown. It would teach the banks a lesson, and bring the consequences of poor risk assessment to Bear.
Yet the moral satisfaction comes at a steep price. Bear's collapse would have unleashed a flood of toxic debt into the jittery market.
That would have triggered furthering tightening of credit and restrictions on liquidity at a time when the market is already gasping.
It could have exacerbated the economic slowdown already under way by eroding even further the confidence of world markets in our financial system.
So Bear is spared the ultimate consequence so that the rest of us can be spared the repercussions from it......
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I don't know if I agree. Bear Stearns is essentially gone. The owners lost, the management loses. At least half the employees will be gone sometime this year. And I think the other banks noticed what can happen.
And the Bear Stearns saga continues.....
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Congress begins probe of Bear Stearns' sale
Congress is looking into the Federal Reserve-backed agreement to sell Bear Stearns to J.P. Morgan Chase, examining the deal to see whether it complied with federal regulations and seeking to determine taxpayer exposure, The Wall Street Journal reported Thursday.
....Many investors have cried foul at that sale price ($2 a share), saying even if Bear was facing bankruptcy, its headquarters in New York City alone were worth far more than the $237 million takeout value.
Lawmakers appear to agree with that assertion......
Questions abound on Bear Stearns buyout
Stunned Bear Stearns shareholders who saw investments virtually wiped out overnight when a takeover deal with JPMorgan Chase was unveiled are demanding to know how it was put together in the first place.......
Bear Stearns Sued by Pensioners Over JPMorgan Offer
Bear Stearns Cos., the troubled brokerage whose stock has fallen more than 90 percent this year, was sued by a pension fund asking a judge to halt a planned buyout for $2.32 a share by JPMorgan Chase & Co....
Bear Stearns Prepares To Lawyer Up
Bear Stearns insisted that nothing was wrong one day, only for everything to go wrong the next. Now, despite its insistence it was telling the truth throughout, the once-mighty Wall Street firm is readying itself for lawsuits......
Friends and Foes of Bear Stearns's Sale to J.P. Morgan
When truth trades at a premium
....Bear Stearns didn't die. It was killed. And lack of credible information about its situation contributed to its speedy demise. It was a tragedy, by all accounts. Thousands of victims sacrificed for the greed of a few.....
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Cramer: "I Was Wrong — Bear Stearns Was in Trouble"
From the NYTimes:
JPMorgan in Negotiations to Raise Bear Stearns Bid
I thought $2 seemed like a gift to JPM
and from MarketTicker:
Articles of Impeachment? Bear Stearns Buyout Illegal?
This is like a gift that keeps on giving...
Bear's Big Guarantee
Did JPMorgan Chase get snagged in a legal loophole?
A careful read of its guaranty agreement with Bear Stearns, part of its deal to acquire the troubled investment bank, suggests that the agreement may be much broader than JPMorgan intended. This apparent oversight likely played a role in JPMorgan's decision over the weekend to consider raising its offer for Bear.
Under the merger agreement, if Bear's shareholders vote down the takeover deal for a year, Bear can terminate the agreement. This we already knew. But it also appears that, in such circumstances, JPMorgan's guarantee to backstop Bear's liabilities stays in place — forever......
Analyst: JPMorgan Will Pay About $65 per Share for Bear Stearns
JPMorgan Chase & Co. will end up paying about $65 per share for Bear Stearns Companies Inc., too high a price for a "deeply troubled company," a Punk, Ziegel & Co. analyst said Tuesday.......
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Behind the Deal, the Hand of the Fed
.......In case there is any confusion about who was pulling the strings behind the scenes of JPMorgan Chase's acquisition of Bear Stearns, the curtain was lifted Monday. By raising its bid — with the grudging approval of the Fed — to $10 a share, from $2, JPMorgan exposed what had long been whispered about but no one dared to say aloud: the Fed is officially in the deal-making business........
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From unknown source, but funny enough to repeat -
The Senate Finance Committee's Chuck Grassley wants to know how Bear Stearns insiders are being treated under the deal with JPMorgan Chase -- specifically whether they'll come out better than if Bear Stearns had gone into bankruptcy. A Bear Stearns spokesman said, "Duh -- yeah."
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Wow! With all this type media coverage you could get the impression that the JP Morgan takeover of Bear Stearns may not be a done deal!
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Grassley Asks Whether Paulson Pushed Fed Into Bear Stearns Deal
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US Senate to hold hearing on Bear Stearns takeover
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Senators Seek Details About Bear Stearns Deal
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Bear Stearns deal sparks Senate probe
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Congress demands answers from Fed, Bear Stearns
JPMorgan faces new fight against Bear Stearns rescue
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Protesters enter Bear Stearns building in New York
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Protesters Enter Bear Stearns Lobby, Demand Meeting With Dimon
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I feel sorry for the guy. I do not see how he is going to get by with just $61 million.
Bear Stearns shares fall after chairman sells stock
Bear Stearns Cos shares fell nearly 5 percent on Friday after Chairman James Cayne, who was seen as opposing JPMorgan Chase & Co's acquisition of the investment bank, sold his stock.
"It is symbolic that he's selling," said David Dreman, chief investment officer of Dreman Value Management LLC, a New Jersey based fund manager that has over $18 billion under management. "It lessens the potential enormously for a long drawn out battle.".....
.....The sale of the shares, which were worth about $1 billion last year when the stock peaked at over $170 a share, were sold for $61 million........
Apparently being short on Bear didn't work for some.
Hedge funds hit by Bear bailout
Long-short equity hedge funds are set to post poor performance for March as the bailout of Bear Stearns and commodity price falls hit recently profitable trades, according to HSBC Alternative Investments.
Many hedge funds have been short the financials sector since the credit crisis began last summer and some banks started revealing large writedowns related to the subprime mortgage meltdown.
However, that short trade turned sour last week after JPMorgan agreed to buy troubled investment bank Bear Stearns and the U.S. Federal Reserve agreed to take control of a $30 billion (15 billion pound) portfolio of Bear Stearns assets......
Whoa Marc! You're being so harsh!
Marc Andreessen: You're Paying the Bills for Bear Stearns CEO
It took Netscape founder Marc Andreessen to point out that U.S. taxpayers are footing the bill for Bear Stearns chairman Jimmy Caynes's pot-smoking, bridge-playing lifestyle.
Caynes netted $60.1 million in cash this week by dumping his entire stake in the foundering firm at $10.84 a share.
The Bear Stearns bailout deal includes a $29 billion loan guarantee from the federal government to help cover Bear's crummy subprime mortgage-based investments. Andreessen, who is turning out to be a hardheaded and opinionated market commentator as well as a highly successful tech entrepreneur (Netscape, Opsware, Ning), explains the implications:
Without that $29 billion of taxpayer money, Jimmy Cayne's stock would be worth $0/share, and if you multiply that by 5.66 million shares, the total would be $0. ...
It is virtually certain that taxpayers are going to take some loss on that $29 billion loan.
When we do, we will have the immense satisfaction of knowing that the first $61.3 million of those losses represent a direct cash transfer from US taxpayers to Jimmy Cayne....
Bear Stearns, JPMorgan complete swap
Bear Stearns Cos. has completed its sale of a 39.5 percent stake to JPMorgan Chase & Co. for about $10 per share, the companies said Tuesday....
Volcker Says Fed's Bear Loan Stretches Legal Power (Update3)
Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.......
......Volcker, the Fed chairman from 1979 to 1987, had implicit criticism for U.S. regulators and market participants who allowed ``excesses of subprime mortgages'' to spread into ``the mother of all crises.'' The Fed's Bear Stearns loan was unusual, he said.....
......"The extension of lending directly to non-banking financial institutions -- while under the authority of nominally `temporary' emergency powers -- will surely be interpreted as an implied promise of similar action in times of future turmoil,'' he said.
Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''....
....."The implications of these decisions, and the lessons from the unfolding crisis itself, surely deserve full debate and legislative review in the period ahead,'' Volcker said...
.....Volcker, 80, said the problems stemmed in part from trading of increasing complicated securities including derivatives that ``have taking on a trading life of their own,'' and said the turmoil ``adds up to a clarion call for an effective response.''
"There was no pressure for change, not in Washington which was spending money and keeping taxes low, not on Wall Street which was wallowing in money, not on Main Street with individuals enjoying easy credit and rising house prices,'' Volcker said.
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And the story continues.
Former Bear Stearns Fund Managers Arrested by FBI
June 19 (Bloomberg) -- Bear Stearns Cos. former hedge fund managers Ralph Cioffi and Matthew Tannin were taken into custody at their homes this morning by FBI agents over their roles in the collapse of two funds that ignited the subprime mortgage crisis last year.
The arrests are the first from a federal probe of possible fraud by banks and mortgage firms whose investments in subprime loans and securities plunged in value, causing losses that now total $396.6 billion. The U.S. Securities and Exchange Commission may sue the two men as early as today, claiming they committed fraud by falsely telling investors the funds they managed were sound, people with knowledge of the case said....
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Hello, Mr. Cioffi. Welcome to your role as scapegoat for the credit crunch. These guys lost $1.6B. I read the other day that money-center banks had written down $107B of their $254B profits since 2004. And that is the stuff on their balance sheets - which I'd image these funds were not.
Who else is going to get arrested?
I agree that Mr. Cioffi and Mr. Tannin are being made scapegoats. It's not like no other hedge fund managers or other investment managers jumped onto the sub-prime CDO market bandwagon on the way to fantastic riches. These two were just the most high profile. If this goes to trial, I do not see how it cannot get ugly for the whole mortgage industry.