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post #1 of 13 (permalink) Old 03-14-2008, 01:22 PM Thread Starter
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OH Lordy, Pick a Bail of Banks

Northern Rock was First. 16 Banks and Credit Unions have either failed or are in Conservatorship. Now comes Bear Sterns. The number of Writedowns is now over $200Billion and the FED has put up nearly a $TRILLION$ to keep the sector afloat.

Makes me feel bad about that day I took two suckers from the basket when I made my deposit.


Lender of Last Resort
Andreas Calianos Mar 13, 2008 11:30 am

On Tuesday the Fed established a new lending facility further expanding the type of paper it would accept as collateral from banks. As Mr. Practical and Andrew Jeffery have pointed out – this is more about solvency than liquidity.

This new facility, together with a host of monetary and coordinated events among the major central banks constitutes classic Lender of Last Resort (LoLR) action.

One of the landmark studies of how the LoLR works can be found in Charlie Kindleberger’s book Manias, Panics, and Crashes, which is a 300 year study of financial crises. Kindleberger was Prof. Emeritus of economics at MIT – an odd place for an economic historian. Into his old age he maintained a unique intellectual balance between the structure of financial markets and the psychology of market participants. In his final years we corresponded by mail and he would send letters he typed himself on an old manual typewriter. He would often say that human behavior is the only significant market constant, and he had centuries of data to prove it.

The LoLR is important because, to paraphrase Kindleberger, just as in a crowded theater where a fire breaks out, individuals will always try to save themselves first, and in doing so, guarantee that few – if any – get saved. The LoLR is not just the fire department – it is the fireman who throws himself onto the fire, in an effort to re-balance the integrity of the financial system.

Credit markets are rapidly de-leveraging and are caught in a vicious cycle of lower prices precipitating higher collateral requirements causing lower pricing, etc. This is a crisis of solvency and not liquidity. The Fed certainly has more tricks, but each new LoLR action typically has less and less effect. These LoLR actions must work and soon. Luckily they usually do work. However, when they fail, the lessons of history are sobering.

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post #2 of 13 (permalink) Old 03-14-2008, 01:24 PM Thread Starter
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If they had assets I would sue for embarrassing the name BEAR.

Bear Stearns Bailed Out by Fed, JPMorgan
Friday March 14, 2:10 pm ET
By Stephen Bernard and Joe Bel Bruno, AP Business Writer
Teetering Bear Stearns Gets Bailout From Federal Reserve, JPMorgan Chase

NEW YORK (AP) -- Bear Stearns Cos., one of the most venerable names on Wall Street, turned to a rival bank and the federal government for a last-minute bailout Friday to prevent it from collapsing.

The Federal Reserve responded swiftly to pleas from Bear Stearns that its coffers had "significantly deteriorated" within a 24-hour period as rumors about the bank's situation fueled the Wall Street version of a run on the bank. Central bankers tapped a rarely used Depression-era provision to provide loans, and said they were ready to provide extra resources to combat an erosion of confidence in America's biggest financial institutions.

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Nearly half the value of Bear Stearns, or about $5.7 billion, was wiped out in a matter of minutes as investors felt the bailout signaled that the credit crisis has reached a more serious stage, and now threatens to undermine the broader financial system -- and the U.S. economy.

"My guess is by next week, there will be rumors of other large, familiar institutions" that might be in financial trouble similar to Bear Stearns, said Anil Kashyap, a professor at the Graduate School of Business at the University of Chicago.

Bear Stearns, the nation's fifth-largest investment bank, made its fortune dealing in opaque mortgage-backed securities -- a strategy that backfired amid the worst housing slump in a quarter century. The bank has racked up $2.75 billion in write-downs since last year, and releases first-quarter results on Monday that could show more losses.

Alan Schwartz, Bear Stearns' chief executive, said the bank had enough money to keep operating at the start of the week. However, market speculation swelled Thursday -- leading investors, customers and lenders to withdraw their business or rescind credit lines.

By that night, Schwartz said the bank recognized that the pace of withdrawals could outstrip the company's resources. He then contacted JPMorgan Chase & Co. -- the third-largest U.S. commercial bank -- for help.

JPMorgan, which has been hurt far less by the mortgage morass than other investment banks, is providing secured funding to Bear Stearns for 28 days, and those loans will in essence be insured by the Federal Reserve. Schwartz said this will buy Bear Stearns time -- allowing it to "convince customers and counterparties that we have the ability to fund ourselves every day, to do business as usual."

Schwartz confirmed, as many on Wall Street suspected, that Bear Stearns could now be up for sale. He told analysts during a conference call that the short-term funding "is a bridge to a more permanent solution." Bear Stearns is working with investment bank Lazard Ltd. to explore its options.

Top executives from Bear Stearns and JPMorgan were discussing the outright sale of Bear Stearns to JPMorgan, according to a person familiar with the talks who was not authorized to speak on the record.

The next 28 days could provide JPMorgan with the time needed to complete due diligence on Bear Stearns before buying the company, giving detail about how much risk is on the books.

JPMorgan is considered to have one of the strongest balance sheets among Wall Street banks, and is not already involved in a rescue like Bank of America's purchase of Countrywide. In a memo sent to employees, Schwartz said the temporary financing would allow the company to "get back to business as usual."

Bear Stearns, which has about 14,000 employees worldwide, has struggled since two hedge funds under its control lost billions of dollars after investing heavily in securities backed by pools of subprime mortgages.

"They were the dominant firm for repackaging mortgages," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC. "That's where all earnings came from. They had the least diversified earnings stream of all of Wall Street securities firms, and as a result, they're paying the price today."

As delinquencies and defaults swelled among subprime mortgages -- given to customers with poor credit history -- investors shied away from purchase securities backed by the troubled loans. Those fears expanded to encompass all but the safest bonds and securities, forcing investment banks to significantly reduce the value of their holdings and drying up liquidity throughout the market. The broader financial services sector has amassed nearly $160 billion in write-downs since the middle of last year.

JPMorgan Chase said the financing would not expose its company to any material risk, though its shares dropped 3.6 percent, or $1.37, to $36.74. Bear Stearns plummeted 39 percent, or $22.50, to $34.50. The news rattled investors around the world, pushing the Dow Jones industrial average down about 225 points and pulling other indexes lower.

AP Business Writers Madlen Read in New York and Martin Crutsinger in Washington contributed to this report.

Bear Stearns Bailed Out by Fed, JPMorgan: Financial News - Yahoo! Finance

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post #3 of 13 (permalink) Old 03-14-2008, 01:56 PM
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Take your finger off the Panic Button bear! For heaven's sake... You remind me of the pyromaniac who became a firefighter.

How 'bout a dose of reality?

Housing and credit problems are threatening to touch off a troubling new trend: an increase in bank failures. As the banking industry braces for higher loan losses, the Federal Deposit Insurance Corp.—which guarantees accounts at more than 8,500 banks and savings associations—has recently increased its tally of "problem" institutions by more than 50 percent, to 76, from the year-earlier period. Meanwhile, the agency is working to bring 25 officials—who served during a wave of bank failures in the savings and loan crisis of the 1980s—out of retirement...

Should I be worried about my bank failing?
For the most part, the answer is no, partly because it is nearly impossible to spot a failing bank, says banking consultant Bert Ely. "Almost no one should try to figure out whether or not their bank is going to fail. What they should do instead is to make sure their deposits are insured," he says...

Bank Failures: Should You Be Worried? - US News and World Report

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post #4 of 13 (permalink) Old 03-14-2008, 06:23 PM Thread Starter
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Take your finger off the Panic Button bear! For heaven's sake... You remind me of the pyromaniac who became a firefighter.

How 'bout a dose of reality?

Housing and credit problems are threatening to touch off a troubling new trend: an increase in bank failures. As the banking industry braces for higher loan losses, the Federal Deposit Insurance Corp.—which guarantees accounts at more than 8,500 banks and savings associations—has recently increased its tally of "problem" institutions by more than 50 percent, to 76, from the year-earlier period. Meanwhile, the agency is working to bring 25 officials—who served during a wave of bank failures in the savings and loan crisis of the 1980s—out of retirement...

Should I be worried about my bank failing?
For the most part, the answer is no, partly because it is nearly impossible to spot a failing bank, says banking consultant Bert Ely. "Almost no one should try to figure out whether or not their bank is going to fail. What they should do instead is to make sure their deposits are insured," he says...

Bank Failures: Should You Be Worried? - US News and World Report
Gee, I remember you saying the very same stuff about the "non-existent" impending housing and financial crisis back in November of 2006. And March 2007, and June 2007, and August 2007, and September 2007, December 2007, and January 2008, and February 2008.

Stay the Course.

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post #5 of 13 (permalink) Old 03-14-2008, 07:11 PM Thread Starter
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From a European [less political] perspective

From a less polarizing perspective. Note the pieces in BOLD. They are somewhat important. The voices from around the world are not hitting the panic button, they are merely pointing out simple math in a complex calculus.

In the mountains it was called "getting to big for our britches"


Bear Stearns exposed as a bank saddled with toxic sub-prime debt
Telegraph.co.uk
By Ambrose Evans-Pritchard
Last Updated: 11:27pm GMT 14/03/2008

Big American finance houses have collapsed before. Continental Illinois required a $4.5bn (£2.25bn) bail-out in 1984 after coming to grief in Texas as the oil boom deflated.

The giant hedge fund Long Term Capital Management was saved by a club of banks in 1998 under the guidance New York Federal Reserve. The fund blew up after Russia's default, which ravaged its portfolio of Danish, Italian and Spanish bonds.

On both occasions the US economy was in rude good health. The damage was quickly contained.

The implosion of Bear Stearns is more dangerous.

A host of other banks, broker dealers, and hedge funds have played the same game, deploying massive leverage at the top of the credit bubble to eke out extra yield. Dozens of them are saddled with the same toxic debt - sub-prime property, credit cards, auto loans, and mountains of unsold paper from the merger boom.

This time the market for default insurance is flashing bright red warning signals across the entire spectrum of US finance.

The swap spreads on Lehman Brothers rocketed to 465 yesterday, mirroring the moves in Bear Stearns debt days before. Fannie Mae and Freddie Mac - the venerable agencies created by Roosevelt that underpin 60pc of the $11 trillion mortgage market - had a heart attack on Monday. Their bonds were in free-fall, threatening to set off another cascade of bank writedowns.

These are not sub-prime outfits. They sit at the apex of the US mortgage credit industry. Hence the dramatic move by the Fed this week to offer a $200bn lifeline, agreeing to accept Fannie Mae and Freddie Mac issues as collateral.

Had the Fed delayed, many traders believe Wall Street would have plunged through resistance levels risking a full-fledged crash.

The 'monoline' bond insurers - MBIA, Ambac, and others - that guarantee most of the $2,600bn market for US municipal bonds have seen their shares collapse by 90pc since the Autumn.

They are still battling to raise enough to capital to save their 'AAA' ratings. Should they fail, the insured bonds will be downgraded in lockstep. Pension funds would be forced to liquidate huge holdings. As New York Governor Eliot Spitzer said before his own liquidation, such an outcome is too dreadful to contemplate.

You have to go back to the banking crisis of the Great Depression to find a moment when the financial system as a whole seemed so close to the precipice.

Although 4,000 US banks failed in the early 1930s (mostly small ones), it was a long-drawn out affair. The bank runs began in the Prairies as falling food prices caused farmers to default in 1930. It seemed to be a local problem.

The crisis reached New York in December 1930 when the Bank of the United States succumbed to panic withdrawals. Legend has it that the 'WASP' clearing banks refused to back a rescue because of the bank's Jewish links.

In those days the contagion spread slowly to the rest of the world. It is much swifter now. The Swiss bank UBS has suffered US sub-prime losses on a scale to match Merrill Lynch and Citigroup, thanks to the curse of mortgage securities.

"We are now experiencing the first truly major crisis of financial globalisation," said the Swiss central bank governor Philipp Hildebrand this week.

"Never before have banks seen such destruction of their balance sheets in such a short time. Moreover, there are signs that the problems are spreading. The risk premiums on commercial property, consumer credit and corporate loans have risen sharply," he said.

Debt levels have been much higher than in the Roaring Twenties; the new-fangled tools of structured credit are more opaque: the $415 trillion nexus of derivative contracts is untested. Nobody knows for sure if the counter-parties are able to deliver on vast IOUs, or whether the construct is built on sand.

What keeps Federal Reserve officials turning at night is fear that the "financial accelerator" will now set off a vicious downward spiral. There is a risk of "very adverse economic outcomes," said Fed vice-chair Don Kohn.

Albert Edwards, global strategist at Societe Generale, said the toppling banks are merely a symptom of a deeper rot. "The banks are not the problem. Nor even the grotesquely leveraged funds. The problem is that an economic bubble financed by ridiculously loose monetary policy is unravelling," he said.

"US house prices have a lot further to fall, which will simply crush the global economy. The lesson from Japan in the early 1990s is that the death dance goes on and on and on," he said.

The Fed blundered badly in the Slump, delaying rate cuts for too long. It allowed the money supply to implode.

It is acting with breath-taking speed this time. Rates have already been cut from 5.25pc to 3pc, and will be slashed again this week. New means of showering liquidity on the banking system are being devised each weak.

As luck would have it, the world's greatest expert on the financial causes of depressions - Ben Bernanke - happens to be chairman of the Federal Reserve.

Bear Stearns exposed as a bank saddled with toxic sub-prime debt - Telegraph

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Gee, I remember you saying the very same stuff about the "non-existent" impending housing and financial crisis back in November of 2006. And March 2007, and June 2007, and August 2007, and September 2007, December 2007, and January 2008, and February 2008.

Stay the Course.
Well, I'd think you'd get it by now...

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post #7 of 13 (permalink) Old 03-14-2008, 08:14 PM Thread Starter
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Well, I'd think you'd get it by now...
I get it. I just learn not to get it on my shoes.

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I get it. I just learn not to get it on my shoes.

Well you must be hanging from the fucking rafters because with his posts it has become so deep I am wearing boots over here........
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Take your finger off the Panic Button bear! For heaven's sake... You remind me of the pyromaniac who became a firefighter.

How 'bout a dose of reality?

Housing and credit problems are threatening to touch off a troubling new trend: an increase in bank failures. As the banking industry braces for higher loan losses, the Federal Deposit Insurance Corp.—which guarantees accounts at more than 8,500 banks and savings associations—has recently increased its tally of "problem" institutions by more than 50 percent, to 76, from the year-earlier period. Meanwhile, the agency is working to bring 25 officials—who served during a wave of bank failures in the savings and loan crisis of the 1980s—out of retirement...

Should I be worried about my bank failing?
For the most part, the answer is no, partly because it is nearly impossible to spot a failing bank, says banking consultant Bert Ely. "Almost no one should try to figure out whether or not their bank is going to fail. What they should do instead is to make sure their deposits are insured," he says...

Bank Failures: Should You Be Worried? - US News and World Report


Sorry Bird, it is not ALL about YOU.............Here read it again.............

You are constantly touting the positive side of the US economy for the past years while the economy and the consumer have slid deeper in to this black tar quagmire. You have no idea what the average consumer has done to themselves and now you are touting a bottom is so close you can smell it.

Due to this touting most others here have stopped trying to respond to your posts showing the positives signs of the economy becuase they know you actuallly have stopped debating the economy and just post a smart ass remark becuase you have no ground to stand on. In every day life you refuse to see the economy and more importantly you refuse to see that the every day lower and middle income class consumer is scraping the bottom of the barrel.

Things are only going to get moe dire for those in those lower and mddle income class consumers now with a tighting money supply, the financial meltdown, Bernanke implementing a 3rd shift at the printing machines, Oil at levels never seen before, the dollar at an all time meltdown, gold at levels never seen before, food prices reaching for the skys and due to all of this inflation is going to squeeze the lower and middle class consumer to the point of death or at least they will be looking for life support. Unfortunately the US is not holding that life support this time around as alot of money has gone up in smoke in various daliances and the US in debt up to it's eyeballs. The exporting side of the manufacturing sector that you could always count on to pull out the economy in decades past has all but been outsourced. The average US comsumer that you never really look at is tapped out and it comes at a very ominous time as the US Govt. is as well tapped out.
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Sorry Bird, it is not ALL about YOU.............Here read it again.............

You are constantly touting the positive side of the US economy for the past years while the economy and the consumer have slid deeper in to this black tar quagmire. You have no idea what the average consumer has done to themselves and now you are touting a bottom is so close you can smell it.

Due to this touting most others here have stopped trying to respond to your posts showing the positives signs of the economy becuase they know you actuallly have stopped debating the economy and just post a smart ass remark becuase you have no ground to stand on. In every day life you refuse to see the economy and more importantly you refuse to see that the every day lower and middle income class consumer is scraping the bottom of the barrel.

Things are only going to get moe dire for those in those lower and mddle income class consumers now with a tighting money supply, the financial meltdown, Bernanke implementing a 3rd shift at the printing machines, Oil at levels never seen before, the dollar at an all time meltdown, gold at levels never seen before, food prices reaching for the skys and due to all of this inflation is going to squeeze the lower and middle class consumer to the point of death or at least they will be looking for life support. Unfortunately the US is not holding that life support this time around as alot of money has gone up in smoke in various daliances and the US in debt up to it's eyeballs. The exporting side of the manufacturing sector that you could always count on to pull out the economy in decades past has all but been outsourced. The average US comsumer that you never really look at is tapped out and it comes at a very ominous time as the US Govt. is as well tapped out.
Well damn! I think I'll go shoot myself...

Don't believe everything you think
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