Dec 12

bear stearns

The Eerie Echo Of 2007: It Really Is Bear Stearns, All Over Again:

While there are numerous and often conflicting opinions about the underlying causes that lead up to the Great Financial Crisis, most agree that the proximal catalyst which finally exposed all the overvalued, illiquid “cockroaches” and confirmed that subprime “is not contained” in the process unleashing the chain of events that culminated with the collapse of Bear, Lehman and AIG, was the failure of one of Bear Stearn’s credit-focused hedge funds in the early summer of 2007.

Here is how the conventional wisdom recalls this development: Continue reading »

Tags: , , ,

May 13
The controversial deal orchestrated by the Federal Reserve that pushed Bear Stearns into the hands of JPMorgan Chase, at the height of the sub-prime crisis, will turn into billions of dollars in gains for for JPMorgan Chase.

The deal will result in an immediate second quarter gain of $1 billion for JPMorgan Chase, admitted Chairman and Chief Executive Officer Jamie Dimon.

(Guess who paid or will pay for this gift? – The Infinite Unknown) Continue reading »

Tags: , , , , , ,

Apr 02

The three newbies – the term auction lending facility, the primary-dealer credit facility, and the term securities lending facility – total more than half-a-trillion dollars, with more if needed. Much of this money is available not only to commercial banks but also to investment banks, which normally aren’t allowed to borrow from the Fed.

How can the Fed afford this largesse? Easy. Unlike a normal lender, the Fed can’t run out of money – at least, I don’t think it can. It can manage monetary policy while in effect creating banking reserves out of thin air and lending them out at interest.

That’s how the Fed reported a $34 billion profit in 2006, the last available year, of which $29 billion was sent to the Treasury. The Fed can even add to its $800 billion stash of Treasury securities by borrowing more of them from other big players.

Then there’s the Treasury. In March the Treasury – which failed this past winter to get private firms to establish a $100 billion “superfund” (please, no giggles from people who equate the term with Love Canal) to keep things called “structured investment vehicles” from having to sell their holdings in a bad market – unleashed Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500) and the Federal Home Loan Banks to buy hundreds of billions of dollars of mortgage-backed securities. Continue reading »

Tags: , , , , , , , , ,

Mar 14

Bear Stearns is one of the best-known US Wall Street firms

US bank Bear Stearns has got emergency funding, in a move that raises fears that one of Wall Street’s biggest names is on the verge of collapsing.

JP Morgan Chase will provide the money to Bear Stearns for 28 days with the Federal Reserve of New York’s backing. Continue reading »

Tags: , , , , , , , , , , ,