wall street thinks bear stearns is in the crapper

opening at $55 and hitting $28, i'd say that was a fair assessment

Hard to argue with this.The question is whether the USA has learned from the British experience with Northern Rock.NR is almost unknown outside Britain, but is one of the largest mortgage outfits.Its business model was to lend long mortgages, and borrow on shorter terms in the markets.This has particular resonance for me, since one of the first things I learned in financial markets in about 1982 (ie before many of you were born) was that the greatest fear of a bankis to find itself lending long and borrowing short termt. To do so on purpose is tier one folly.John Major (the last Conservative leader) gets a bad press, but when Barings was blown up by Nick Leeson, he let the stupid fuckers die.Saldy, Brown (sort of like a dull Blair), feared the consequences, and a stupid long drawn out process of bidders trying (and failing) to put together a deal went on for months.We actually had a run on the bank, almost unknown in Britain.The government start off with a little help, then more and more, then guaranteeing all consumer desposits without limits, then even finding themselves having to guarantee even loans from other banks.A critical problem was that NR sponsor a soccer team (yes, really it made it far worse), and thousands the shittiest most useless people in Britain.Lots of them, and concentrated in Labour seats, and an election was thought to be near...A destination for complaints about retail banking stated than they got more complaints about Northenr Rock then any three other firms, even though it was far from being the largest.It deserved to die.But the US is now swinging into election season, would any administration let Bear die now ?Will the temporary facility become a US government guarantee.In some ways it was easier for the British with NR. There is nothing to stop the Chinese or any other foreigners buying it, but the US government does not have that freedom, since it's xenophobia for "critical" resources has always been high.Actually the most powerful retail bank in Britain is (sort of) Chinese, and has been for years, (HSBC does of course stand for HongKong and Shanghai Banking Corporation).BS would be a beautiful vehicle for a serious sovereign wealth fund, who would love the idea of a mid-risk long term investment, and won't really care about liquidity.But Bush can't allow that ,even if he wanted to.As we saw with Northern Rock, it could not be taken over by another firm because no one can borrow that scale of cash easily.To make it worse, since it was effectively being run by the government and backed by taxpayer funds, the politics were that any buyer could not be allowed to "make too much money".I cannot call how much of an effect that is in the US political dynamic, but I trust everyone here can see the problem that no one is going to buy a risky asset, even at a good price, if some politician is going to stop you making an "unfair" return.A few British politicians know CAPM (I've explained it to a few), but there is no way they'd stand up in public and use it.Given the similarities of the political dynamic, I see the BS saga going on until after November...There is one solution, but too elegant for the Creationists in the White House. Sell BS to 10 sovereign weatlh funds. No overall control, so not "threat" to US security.'v

Will we see then a bank called "Bear Chase Morgan" ?

Largest government bailout of securities firmFed Invokes Little-Used Authority to Aid Bear Stearns QuoteFederal Reserve Chairman Ben S. Bernanke invoked a law last used four decades ago to keep Bear Stearns Cos. from collapsing after the securities firm sought emergency funding from the central bank. The loan to Bear Stearns required a vote today by the Fed's Board of Governors because the company isn't a bank, Fed staff officials said. The central bank is taking on the credit risk from Bear Stearns collateral, lending the funds through JPMorgan Chase & Co. because it's operationally simpler to accomplish than a direct loan, the staff said on condition of anonymity. Bernanke took advantage of little-used parts of Fed law, added in the 1930s and last utilized in the 1960s, that allow it to lend to corporations and private partnerships with a special board vote. The senior staffers declined to describe how large the loan to Bear Stearns is, and whether a private-sector bailout was attempted first before the Fed extended credit through JPMorgan.While U.S. authorities have been faster than their U.K. counterparts in announcing the rescue package for Bear Stearns, former Bank of England policy maker Willem Buiter says that doesn't make their course of action was the correct one. ``This creates the same moral hazard issues that we saw with Northern Rock,'' said Buiter, now a professor at the London School of Economics. ``This bank is being given access to public money, and we don't know what the terms are.''

QuoteJPMorgan closes deal on Bear StearnsBy JOE BEL BRUNO and MADLEN READ, AP Business Writers 10 minutes agoNEW YORK - JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million, a stunning collapse for one of the world's largest and most venerable investment banks. JPMorgan Chase & Co. said the $2 a share, all-stock deal has received the required approvals from the federal government and the Federal Reserve. Bear Stearns shares close Friday at $30 a share.The Fed will provide special financing to JPMorgan Chase in connection with the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets.

that is ugly...

QuoteOriginally posted by: TraderJoeQuoteJPMorgan closes deal on Bear StearnsBy JOE BEL BRUNO and MADLEN READ, AP Business Writers 10 minutes agoNEW YORK - JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million, a stunning collapse for one of the world's largest and most venerable investment banks. JPMorgan Chase & Co. said the $2 a share, all-stock deal has received the required approvals from the federal government and the Federal Reserve. Bear Stearns shares close Friday at $30 a share.The Fed will provide special financing to JPMorgan Chase in connection with the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets.Brutal. At some level, you just have no other choice but to scratch your head and laugh, I guess.What or who is next?

Looks like big fun tomorrow: Tokyo down 4%; S&P futures off 3%I think the Fed needs to decide, over the next few days, exactly how far it is willing to go, and then go that far. The piecemeal approach does not inspire confidence. At some point, surely it makes sense to accept that we're due for a recession, and to let it happen. I suspect that even at this point there are actors delaying what they might otherwise do out of the hope that the Fed might do something to make their lot better, as well as the fear that after they've played their cards, the Fed will somehow change the rules on them.

QuoteOriginally posted by: MarsdenLooks like big fun tomorrow: Tokyo down 4%; S&P futures off 3%I think the Fed needs to decide, over the next few days, exactly how far it is willing to go, and then go that far. The piecemeal approach does not inspire confidence. At some point, surely it makes sense to accept that we're due for a recession, and to let it happen. I suspect that even at this point there are actors delaying what they might otherwise do out of the hope that the Fed might do something to make their lot better, as well as the fear that after they've played their cards, the Fed will somehow change the rules on them.Agreed ... the main problem with this crisis has been the lack of transparency: money was lost - who lost it ? A body count was needed, the weakest left to the lions, so life could go on. Progress is not made without destruction. But the hopes that time would solve the problems without any big losers are now gone. Maybe the banks cannot be rescued anymore by steepening the yield curve, maybe credit was already so overstretched that it's not responsive to the changes in the Fed Funds (again, Marsden comments on "Stopping the Bleeding" make this point better than I do), and therefore people are expecting for another magical solution, and will not be the first to commite themselves to a costly deleveraging or something like that, specially since the fear of sistemic risk may push the Fed to keep on helping the banks.

QuoteOriginally posted by: DCFCA critical problem was that NR sponsor a soccer team (yes, really it made it far worse), and thousands the shittiest most useless people in Britain.Jesus, that's funny

Poor Joe Lewis ...

QuoteOriginally posted by: TraderJoeQuoteJPMorgan Chase & Co. said the $2 a share, all-stock deal has received the required approvals from the federal government and the Federal Reserve. Bear Stearns shares close Friday at $30 a shareand the 52 week high was something like $159.36 so it's basically selling for about 1% of that

QuoteOriginally posted by: PaperCutBrutal. At some level, you just have no other choice but to scratch your head and laugh, I guess.What or who is next?indeed, that and be grateful that most of my money is in commodities

JP paid $236 mil, but BSC's building at 383 Madison is probably worth about $300 mil. Either JP got a deal, or BSC sans real estate is literally worthless. (from dealbreaker)