Government bails out Bear Stearns - guess the $200 billion didn't last long...

[JackRiddler]

So the crash didn't happen this week, thanks to the $200 billion liquidity injection, plus a bit of Spitzer-induced euphoria for the traders on the floor.

But what's left of the Carlyle Amsterdam fund is still being seized, and Bear Stearns needed a bail-out anyway today - more of your money at work.

http://www.nytimes.com/2008/03/15/business/15bear.html?_r=1&hp&oref=slogin

Run on Big Wall St. Bank Spurs Rescue Backed by U.S.

By LANDON THOMAS Jr.
Published: March 15, 2008

Just three days ago, the head of Bear Stearns, the beleaguered investment bank, sought to assure Wall Street that his firm was safe.

But those assurances were blown away in what amounted to a bank run at Bear Stearns, prompting JPMorgan Chase and the Federal Reserve Bank of New York to step in on Friday with a financial rescue package intended to keep the firm afloat. The move underscores the extreme stresses that the credit crisis has imposed on the financial system and raises the once-unthinkable prospect that major Wall Street firms might fail.

The developments may only postpone the eventual sale of all or part of Bear Stearns, which has had crippling losses on mortgage-linked investments. To keep the 85-year-old firm solvent, JPMorgan, backed by the New York Fed, extended a secured line of credit that gives Bear Stearns at least 28 days to shore up its finances or, more likely, to find a buyer.

News of the bailout ignited fears that other big banks remain vulnerable to the continuing credit crisis, and stocks tumbled in another rocky day for the markets. Financial shares led the way, with shares of Bear Stearns plunging 47 percent. Hours after the rescue was announced, another Wall Street firm, Lehman Brothers, said it had secured a three-year credit line from banks. Its stock fell 15 percent....

JP Morgan, eh? What's their exposure in this?

Could they fail? Unthinkable!

So what's on the menu to avoid next week's crash?

Another $400 billion down the sinkhole, another ton of bricks dropped on the dollar boat?

A $20 Walmart gift certificate (150% APR) for everyone?

New oil reserves discovered on the moon? Tulips on Mars? Monetize the air?

Can they bring back the Soviet Union and have it fail again?

An attack on Iran? 9/11 plus Seven?

What's left in the arsenal?

Anything but to acknowledge that late capitalism has trashed the planet and made debt slaves of us all. And trashed the planet. Anything but to end the eternal war, build railways, go solar, feed the world's people.

Kooyanisqatsi (Hopi): crazy life, a way of life that cannot be sustained, a condition that demands another way.

[Mnemosyne]

1. This definitely needs another KnR for more exposure. It brings to mind

that spinning the plates on rods trick; no way all of those plates can keep spinning eternally. There have been quickly increasing wobbles on way too many of those plates of late.

The crashes should begin fairly soon.

Damn, I hate even thinking such a thing, but it seems so inevitable now.

And it is only beginning. :(

Imagine sneezing through $200b in less than a week! When I think about the multitude of people that could have been helped...

Thanks for the post Jack!

[Greyhound]

2. Here's #4. This after the $100B a couple weeks ago and I believe

somebody shoveled another $80B into the furnace earlier this year.

The IMF is telling governments that their citizen's product must be confiscated to keep the rulers on their throne.

Warren Buffet is sounding the klaxon, saying that "derivative securities are a mega-catastrophe" and "financial weapons of mass destruction". (over $500 TRILLION in unsecured, unregulated side bets placed by 'financial professionals' with OPM and no way to cover)

Call me crazy, but is anybody else sensing a trend? (and why are none of these stories, all posted, not getting any play here?)

[magellan]

3. The more I consider Repub hypocrisy, the angrier I get

People welfare: anathema

Corporate welfare: Why, SURE! Have MORE!

I hope the GOP gets taken apart slowly and painfully by the people of this country.

[Taxmyth]

4. Hmmmmmmmm

Did Bear Stearns get bailed out after 9-11? Didn't they have offices in the WTC? Here's their 2006 Annual Report:

http://www.sec.gov/Archives/edgar/data/777001/000091412108000077/0000914121-08-000077.txt

[JackRiddler]

6. Please explain...

That's a very long document and I'm not sure to what you refer.

[orleans]

5. "more of your money at work"

well thank god my money is working SOMEWHERE
because i know i can't afford to invest in anything!

[JackRiddler]

7. kick and an article...

http://www.counterpunch.org/

Panicky Fed Chief
Bearly Alive

By MIKE WHITNEY

On Friday, Bear Stearns blew up. It was the worst possible news at the worst possible time. A day earlier, the politically-connected Carlyle Capital hedge fund defaulted on $16.6 billion of its debt. Carlyle boasted a $21.7 billion portfolio of AAA-rated residential mortgage-backed securities, but was unable to make a margin call of just $400 million. (Where did the $21.7 billion go?) The news on Bear was the last straw. The stock market started reeling immediately; shedding 300 points in less than an hour. Then, miraculously, the tide shifted and the market began to rebound.

If there was ever a time for Paulson's Plunge Protection Team to come to the rescue; this was it. For weeks, the markets have been battered with bad news. Retail sales are down, unemployment is up, consumer confidence is in the tank, inflation is rising, the dollar is on the ropes, and the credit crunch has spread to even the safest corners of the market. Facing these fierce headwinds, Washington mandarins and financial heavyweights had to decide whether to sit back and let one small investment bank take down the whole equities market in an afternoon or stealthily buy a few futures and live to fight another day? Tough choice, eh?

We'll never know for sure, but that's probably what happened.

We'll also never know if Bernanke's real purpose in setting up his new $200 billion auction facility was to provide the cash-strapped banks with a place where they could off-load the mortgage-backed junk that Carlyle dumped on the market when they went belly-up. That worked out well, didn't it? Now the banks can trade these worthless MBS bonds with the Fed for US Treasuries at nearly full value. What a deal! That must have been the plan from the get-go.

[Hydra]

8. My big question

Is how far they are willing to inflate the currency to keep the ship afloat.

If I'm not mistaken, here's what's happened so far:

$200 Billion
+$300 Billion
+$200 Billion
--------------
$700 Billion injected into the system in the last year

+

Interest rates dropped by 2.25% to 3.0%, and likely to reach 1.0% sometime this year

I'm seeing HUGE inflation in our future, even on top of the approximately 25% we've seen so far.

[JackRiddler]

9. No limit, I figure...

They see one big advantage in inflating the currency: all these trillions in debt and derivatives probably become more manageable. This is because as imperial top dog the U.S. is the only country that gets to denominate its debt in its own currency (so when the dollar drops, the debt's still in dollars, an advantage denied to the Argentinean peso). Dollar inflation may salvage the debt markets and the government's payments, though it will be a disaster for the economy -- which will not benefit as predicted if dollar inflation means oil prices keep rising in dollars! Anyway the credit's going to freeze up, consumers will stop spending, housing prices will plunge further, so why should capital choose dollar investments in the U.S., even if the dollar gets cheaper. We're so fucked.