yeah man, everyone that had rebuttals to my posts about the economy being ed when i started this thread, had their heads in the sand.
22,000 jobs lost in january, and just released 63,000 jobs lost in february, and its not going to get any better for some time.
and bottom line the fed will cut rates again at the next meeting but that is having a smaller and smaller affect on bonds and long terms rates every time. showing that driving the dollar into the ground is not increasing liquidity.
Jobs in U.S. Unexpectedly Drop, Bolstering View Economy Is in a Recession
March 7 (Bloomberg) -- Employers unexpectedly cut jobs in February for the second consecutive month, adding to evidence the U.S. is in a recession that may dominate the economic debate in this year's presidential campaign.
Payrolls fell by 63,000, the most in five years, after a revised decline of 22,000 in January, the Labor Department said today in Washington. The jobless rate dropped to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work.
U.S. Consumer Debt Expanded $6.9 Billion in January on Credit-Card Charges
March 7 (Bloomberg) -- U.S. consumer borrowing rose in January as Americans spent twice as much on their credit cards as they did a month earlier.
Consumer credit increased by $6.9 billion to $2.52 trillion, the Fed said today in Washington. In December, credit gained $3.7 billion, less than a previously reported increase of $4.5 billion. The figures don't include borrowing secured by real estate, such as home-equity loans.
``There's not much gas left in the tank,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``In the early stage of a recession, consumers tend to rely on credit cards to see them through the hard times.''
Gold Rises in Asia as Dollar Falls to Record Low Against Euro
By Feiwen Rong
March 7 (Bloomberg) -- Gold rose in Asia after the dollar fell to a record against the euro, boosting bullion's appeal as an alternative asset. Silver increased to trade near its highest in 27 years.
The dollar dropped 14 percent against the euro in the past year, and has fallen 5.3 percent since Dec. 31. It traded at $1.5396 at 2:34 p.m. Singapore time, after reaching an all-time low of $1.5407. Investors normally buy gold to preserve purchasing power when the dollar is declining. The U.S. currency also slid to a three-year low against the Japanese yen.
diskodave
``The U.S. government has a technology called a printing press that allows it to produce as many U.S. dollars as it wishes at essentially no cost,'' Bernanke said
Bernanke Playbook Gives Hints on Fed's Next Moves: Mark Gilbert
Commentary by Mark Gilbert
March 13 (Bloomberg) -- Want the inside skinny on Federal Reserve Chairman Ben Bernanke's next moves as he battles to avert recession, bank bankruptcies and the collapse of capitalism? His detailed playbook is freely available from the Fed's Web site.
In November 2002, when Bernanke was merely a Fed governor, he gave a speech about ``Deflation: Making Sure `It' Doesn't Happen Here.'' More than five years on, the text provides a step- by-step guide to the Fed's reaction to the current credit crisis, and hints at the tricks left up the central bank's sleeve.
The speech is relevant even though two of its premises -- a general decline in consumer prices and a benchmark central-bank rate that's close to zero -- don't currently apply to the U.S. experience. Bernanke detailed the Fed's likely response once the blunt instrument of cutting borrowing costs had lost its potency to revive the economy -- which is exactly the situation the central bank finds itself in now.
``When inflation is already low and the fundamentals of the economy suddenly deteriorate, the central bank should act more preemptively and more aggressively than usual in cutting rates,'' Bernanke said. ``By moving decisively and early, the Fed may be able to prevent the economy slipping into deflation.''
That seems to encapsulate the actions so far, particularly the emergency cut enacted on Jan. 22 when the Fed wasn't scheduled to meet. The futures market, moreover, tells us there's a 72 percent chance that the Fed will lower its key rate to 2.25 percent from 3 percent when it next meets March 18. Monetary policy, however, seems impotent just now.
Threats to Stability
``At times of extreme threat to financial stability, the Federal Reserve stands ready to use the discount window and other tools to protect the financial system, as it did during the 1987 stock market crash and the Sept. 11, 2001, terrorist attacks,'' Bernanke said in his speech.
Unlike in 1987 and 2001, propping the discount window open hasn't boosted the flow of money around the economy in recent months. The Fed can cut the cost of cash; it hasn't yet been able to boost the availability of funds.
This week's $200 billion offer to exchange pristine Treasury securities for tarnished mortgage debt is a tacit recognition by the Fed that slashing its key rate from the 5.25 percent level that prevailed in September has failed to thaw the mortgage market. Bernanke presaged just such a bond-market move in his 2002 talk.
``Another option would be for the Fed to use its existing authority to operate in the markets for agency debt,'' he said. It could offer ``fixed-term loans to banks at low or zero interest, with a wide range of private assets, including, among others, corporate bonds, commercial paper, bank loans and mortgages deemed eligible as collateral.''
`Fire Sales'
Bernanke cited a 1933 study by Yale economist Irving Fisher, who he said emphasized ``the potential connections between violent financial crises, which lead to `fire sales' of assets and falling asset prices, with general declines in aggregate demand and the price level.'' That sounds horribly familiar, doesn't it?
``A healthy, well-capitalized banking system and smoothly functioning capital markets are an important line of defense against deflationary shocks,'' Bernanke said. Well, that line of defense has been well and truly breached and lies in shards.
``The U.S. government has a technology called a printing press that allows it to produce as many U.S. dollars as it wishes at essentially no cost,'' Bernanke said. ``A determined government can always generate higher spending and hence positive inflation. Sufficient injections of money will ultimately always reverse a deflation.''
Passing it On
If the recipients of those cash injections hoard the largess instead of passing it on to borrowers in the wider economy, there's a problem.
So what other unconventional measures might we expect from Bernanke's Fed in the coming months, based on the speech that tagged him as ``Helicopter Ben'' because of its reference to Milton Friedman's phrase about helicopters dropping money into the economy?
``One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period,'' Bernanke wrote. ``A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt, say, bonds maturing within the next two years.''
Yield Guarantees
The central bank would pledge itself to unlimited purchases of Treasury notes to prevent yields from rising above a preset target level, Bernanke said. ``If operating in relatively short- dated Treasury debt proved insufficient, the Fed could also attempt to cap yields of Treasury securities at still longer maturities, say three to six years.''
In the 1940s, ``the Fed maintained a ceiling of 2.5 percent on long-term Treasury bonds for nearly a decade,'' Bernanke noted. It also enforced caps on 12-month Treasury certificates and 90-day Treasury bills during part of that period.
The speech also suggests that European Central Bank President Jean-Claude Trichet's pleas for the U.S. to speak out against the dollar's decline to a record against the euro will continue to fall on deaf ears.
``It's worth noting that there have been times when exchange-rate policy has been an effective weapon against deflation,'' Bernanke said, citing the 40 percent devaluation of the dollar against gold enacted in 1933 to 1934. ``The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Monetary actions can have powerful effects on the economy.''
So, brace yourself for a Fed funds rate close to zero, interest-rate-free loans in exchange for a much wider range of debt collateral, and further dollar weakness. And, if Helicopter Ben sticks to the script, the Fed might even guarantee the value of two-year Treasury notes. Strange days indeed.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at [email protected]
Last Updated: March 12, 2008 20:01 EDT
groovedaddy21
Today Bush said "I believe that we're a resilient economy. In the long run, I'm confident our economy will continue to grow because the foundation is solid."
How is it that the foundation of the economy is solid when we have a sinking currency that continues to devalue and lose confidence worldwide?
This billboard is in Bolivia and i think it says "If the dollar is losing value, save it in Euros!!"
What I don't see much talk on the major news network is the status of the petro-dollar. Until recently the world's most precious commodity such as oil and natural gas have been denominated in US dollars. This is why the USD has been the world's most dominant currency for so long. This is no longer the case and because of the falling USD, oil producing nations are switching their denomination to Euros, in other words, they are pricing oil in Euros. Consequently, this move drives the value of the dollar further down, as confidence in dollar is weakened. The world banks no longer need to hold large reserve of USD to buy oil.
Some believe that the US foreign policy in the middle east is closely tied to how these countries link their petroleum currency. In 2000, Iraq switched it's denomination to Euros. This is supposedly the reason the US invaded Iraq in 2003. 9/11 skeptics believe the plan to invade Iraq was drawn up prior to the terrorist attack on the WTC. Just recently Iran has switched over to Euros. That's why the US continue to put sanction and threaten Iran. In my opinion, I don't believe war with Iran is likely. We would have to have an idiot in the White House in order to pull off this kind of catastrophic move. oh wait a minute...
Meanwhile, here at home the economy is on the verge of total collapse. And what does Ben Burnabanke do? He continues to pour kerosene on the fire, as Jim Rogers puts it (video below)
vxman
bearn stearns is going out of business, sell sell sell.
diskodave
quote:
Originally posted by vxman
bearn stearns is going out of business, sell sell sell.
Fed and Rival Bail Out Bear Stearns
Friday March 14, 6:09 pm ET
By Stephen Bernard and Joe Bel Bruno, AP Business Writers
On the Brink of Collapse, Bear Stearns Gets a Lifeline From a Rival and the Feds
NEW YORK (AP) -- On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government. The near-miss raised new alarm about the credit crisis -- and whether other big firms might be in jeopardy.
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The rescue came from JPMorgan Chase & Co. and, in an extraordinary step, the Federal Reserve, both rushing to pump new money into the venerable Wall Street firm after its financial state deteriorated so much in a 24-hour period that it threatened to fail.
Bear Stearns stock lost nearly half its market value, about $5.7 billion, in a matter of minutes, and pulled the broader market down with it. The Dow Jones industrial average fell nearly 200 points.
If Bear Stearns were to go under, "it has the potential of bringing down the whole market," said Richard Bove, an analyst at Punk, Ziegel & Co. "This is the crescendo of the crisis."
JPMorgan and the central bank agreed to extend loans for 28 days to Bear Stearns, the nation's fifth-largest investment bank and the one hit hardest by the subprime mortgage mess.
Two hedge funds managed by Bear Stearns failed last summer, setting off a credit crisis that has swept up banks and brokerages around the globe.
In backing up JPMorgan, the Fed dusted off a rarely used, Depression-era provision to provide loans. It also said it was ready to step in to fight an erosion of confidence in the nation's largest financial institutions.
Officials from the Fed and the Securities and Exchange Commission held conference calls throughout the day Thursday to assess the potential impact on the broader economy, according to a Treasury official, who spoke on condition of anonymity because of the sensitive nature of the discussions.
For Bear, the crisis started when market speculation grew that it might have to seize collateral -- mostly mortgage-backed securities worth next to nothing -- from the private equity firm Carlyle Group.
Carlyle runs a bond fund and has come under intense pressure during the past week from creditors demanding collateral to back their investments.
As speculation swelled in the market, investors, customers and lenders raced to withdraw their money or rescind their credit lines. By Thursday night, Bear Stearns Chief Executive Alan Schwartz said, the bank realized the withdrawals might outpace the bank's resources -- so it reached out to JPMorgan for help.
JPMorgan, the nation's third-largest bank, has been hurt far less by the mortgage mess than other financial institutions. It will provide secured loans to Bear for four weeks -- insured, in essence, by the Fed.
Schwartz said it would buy Bear time and allow it to convince customers "that we have the ability to fund ourselves every day, to do business as usual." No one has disclosed how large the financing offered to Bear Stearns is.
The CEO also confirmed -- as many on Wall Street had suspected -- that Bear Stearns could be up for sale. He told analysts on a conference call that the bailout is a "bridge to a more permanent solution."
Bear is working with investment bank Lazard Ltd. to explore its options. That may include an outright sale of Bear Stearns to JPMorgan, something top executives from both banks were discussing, according to a person familiar with the talks who was not authorized to speak on the record.
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 Financial Corp., the nation's largest mortgage lender.
Bear Stearns, which has about 14,000 employees worldwide, has struggled since the 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. "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, investors shied away from buying 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 money throughout the market.
Bear Stearns has racked up $2.75 billion in write-downs since last year, and releases first-quarter results on Monday that could show more losses. The bank lost $859 million during the quarter that ended Nov. 30, a stark contrast to its $558 million profit during the same period just one year earlier -- before the credit crisis.
The broader financial services sector has racked up nearly $160 billion in write-downs since the middle of last year.
"My guess is by next week, there will be rumors of other large, familiar institutions" that could be in trouble, said Anil Kashyap, a professor at the Graduate School of Business at the University of Chicago.
JPMorgan said it would not expose itself to any serious risk by helping Bear, but its shares dropped anyway, down $1.57, or about 4 percent, to $36.54. Bear stock plummeted 47 percent, or $27, to $30.
AP Business Writers Madlen Read and Dan Seymour in New York and Martin Crutsinger and Marcy Gordon in Washington contributed to this report.
ninetyninej
good posts, and whats worse is there is no stopping this dry up of liquidity. the fed reserve has used up almost all of its persuasive power. only thing left is printing money.
and the 10 year treasury bond yield is almost as low as 6 weeks ago when rates were phenomenal but the rates that went back up mid Feb have stayed relatively high despite the bond market lowering, meaning there isn't a sole investor out there willing to stick their neck out on the line and lend money or buy mortgage backed securities....except the gov't!
since the 'stimulus' package passed allowing fha to buy 'jumbo conforming' loans up to 729K until 12/31/08 starting monday, that fact plus the fact that banks can't hold all the paper, all our guidelines grew even more tighter today in a memo sent out letting us know that our loans have to meet fannie mae and freddie mac guidelines because no one else will buy the loans!
in the end our dollar will be because ben and the fed will print money out of thin air to fund our debt because local and foreign investors are on the sidelines, and the gov will own virtually all our mortgage back securities
Fed Efforts Foiled By Banks as Residential Mortgage Rates Rise
By Bob Ivry and Sharon L. Lynch
March 15 (Bloomberg) -- Ben S. Bernanke can't revive the housing market and the banks are no help.
The U.S. Federal Reserve cut interest rates five times, pumped $200 billion into the financial system, and yesterday its New York branch provided funds to help rescue Bear Stearns Cos.
None of that has brought down mortgage rates for residential borrowers, whose success in refinancing or buying would help bolster the U.S. economy. The interest rate on a 30- year fixed-rate mortgage has climbed to 6.37 percent from 5.5 percent since Jan. 24, according to the Mortgage Bankers Association, as financial institutions try to cover $195 billion in mortgage-related losses and save capital for future losses.
``The mortgage rate isn't down as much as it should be because the banks are in desperate straits and they need to maintain a larger spread than they normally would,'' said Alan Nevin, chief economist with the California Building Industry Association in Sacramento. ``The banks need to generate income and the easiest way to do that is to broaden the spread. If they pay 3.5 percent and charge 6 percent, that's a lot of money.''
Over the past 10 years, the average spread between 10-year U.S. Treasuries and 30-year fixed-rate mortgages has been 1.75 percent. Last week, the spread was 2.83 percent. That means a homeowner's mortgage costs are more expensive now than they have been.
Bernanke Discards Monetary History With Bear Stearns Bailout
By Craig Torres
March 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke is being forced to throw out four decades of monetary history by a financial system choking on miscalculated risks and a deepening recession.
Bernanke and the four Fed governors voted yesterday to become creditors to Bear Stearns Cos., a securities firm that isn't a bank, by invoking a law that hasn't been used since the 1960s. Three days earlier, the Fed said it would swap Treasury notes on its balance sheet for privately issued mortgage-backed securities held by Wall Street firms.
stefanoc
AP
JPMorgan to Buy Bear for $2 a Share
Sunday March 16, 10:31 pm ET
By Joe Bel Bruno and Madlen Read, AP Business Writers
JPMorgan Says It Will Buy Ailing Bear Stearns for Fire-Sale $2 a Share, or $236.2 Million
NEW YORK (AP) -- Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million.
The stunning last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system sparked by the collapse in the subprime mortgage market. Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse.
The Federal Reserve and the U.S. government swiftly approved the all-stock buyout, showing the urgency of completing the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.
"This is going to go down in very historic terms," said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. "This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we're probably heading into a recession."
JPMorgan Chase & Co. said it will guarantee all business -- such as trading and investment banking -- until Bear Stearns' shareholders approve the deal, which is expected to be completed during the second quarter. The acquisition includes Bear Stearns' midtown Manhattan headquarters.
JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression, two World Wars and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.
At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.
"Having taking Bear Stearns out of the problem category, and the strong action by the Federal Reserve, we would anticipate the market will behave quite differently on Monday than it was Thursday or Friday," Cavanagh said.
Some analysts expected it to be a brutal day for global stocks, nevertheless. Shortly after the news broke, Japan's benchmark Nikkei stock index plunged more than 3 percent in morning trading.
A bankruptcy protection filing of Bear Stearns could have heightened anxiety in world financial markets amid a deepening credit crunch. So far, global banks have written down some $200 billion worth of securities slammed amid the credit crisis -- more write-downs could come. Last week, a bond fund controlled by private equity firm Carlyle Group faltered near collapse because of investments linked to mortgage-backed securities.
JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.
"The past week has been an incredibly difficult time for Bear Stearns," Schwartz said in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."
Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world's largest investments banks -- it was a prop for the U.S. economy and the global financial system. An outright failure would cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.
After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.
This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail." On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.
Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities -- and what was once a cash cow turned into the investment bank's undoing.
In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.
The funds' demise and subsequent problems in the credit markets called into question Bear Stearns' ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.
Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.
Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."
Before Greenberg's ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.
AP Business Writers Jeannine Aversa in Washington and Stephen Bernard contributed to this story.
Just think of all the traders who bought BSC on margin... OUCHHH!
Lehman Brothers is next in line...
quote:
Originally posted by stefanoc
AP
JPMorgan to Buy Bear for $2 a Share
Sunday March 16, 10:31 pm ET
By Joe Bel Bruno and Madlen Read, AP Business Writers
JPMorgan Says It Will Buy Ailing Bear Stearns for Fire-Sale $2 a Share, or $236.2 Million
NEW YORK (AP) -- Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million.
The stunning last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system sparked by the collapse in the subprime mortgage market. Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse.
The Federal Reserve and the U.S. government swiftly approved the all-stock buyout, showing the urgency of completing the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.
"This is going to go down in very historic terms," said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. "This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we're probably heading into a recession."
JPMorgan Chase & Co. said it will guarantee all business -- such as trading and investment banking -- until Bear Stearns' shareholders approve the deal, which is expected to be completed during the second quarter. The acquisition includes Bear Stearns' midtown Manhattan headquarters.
JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression, two World Wars and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.
At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.
"Having taking Bear Stearns out of the problem category, and the strong action by the Federal Reserve, we would anticipate the market will behave quite differently on Monday than it was Thursday or Friday," Cavanagh said.
Some analysts expected it to be a brutal day for global stocks, nevertheless. Shortly after the news broke, Japan's benchmark Nikkei stock index plunged more than 3 percent in morning trading.
A bankruptcy protection filing of Bear Stearns could have heightened anxiety in world financial markets amid a deepening credit crunch. So far, global banks have written down some $200 billion worth of securities slammed amid the credit crisis -- more write-downs could come. Last week, a bond fund controlled by private equity firm Carlyle Group faltered near collapse because of investments linked to mortgage-backed securities.
JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.
"The past week has been an incredibly difficult time for Bear Stearns," Schwartz said in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."
Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world's largest investments banks -- it was a prop for the U.S. economy and the global financial system. An outright failure would cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.
After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.
This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail." On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.
Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities -- and what was once a cash cow turned into the investment bank's undoing.
In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.
The funds' demise and subsequent problems in the credit markets called into question Bear Stearns' ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.
Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.
Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."
Before Greenberg's ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.
AP Business Writers Jeannine Aversa in Washington and Stephen Bernard contributed to this story.
Originally posted by diskodave
Just think of all the traders who bought BSC on margin... OUCHHH!
Lehman Brothers is next in line...
this is just terrible. im just wondering how much the fed will cut the rate by this coming week.
diskodave
Black monday tomorrow...
What's funny is that Bear Stearns CEO was on CNBC the other week assuring investors that Bear Stearns is doing fine, and the company is NOT going under...
I find it really weird that Bear Stearns went from a company worth $4.08 billion on Friday to $236.2 million on Sunday without any financial justification. Did they pull a $2 per share figure out of a hat?
Watch this video (the info after his cramer bash). Don Harrold discusses how the FED took BSC off the free market and paid JPM to "buy" BSC @ $2 per share... screwing investors.
Dollar Falls to a Record Low Vs Euro
Monday March 17, 1:53 am ET
Dollar Falls Below 96 Yen and to Record Low Vs Euro on News JP Morgan Is Buying Bear Stearns
TOKYO (AP) -- The dollar fell to a record low against the euro and to its lowest level in 12 1/2 years against the yen Monday as investors reacted nervously to news that JP Morgan Chase is buying rival investment bank Bear Stearns.
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The move, aimed at averting a bankruptcy, sparked renewed worries among traders about the full extent of the credit crisis, sending Asian stock markets tumbling.
The U.S. currency also was hit by word that the Federal Reserve on Sunday cut its discount rate, or its lending rate to financial institutions, by a quarter point to 3.25 percent.
The dollar fell as low as 95.72 yen, its lowest point since August 1995, in morning trading in Tokyo before recovering to 96.76 yen in afternoon trading. The dollar finished in New York trading on Friday at 99.17 yen. It broke below 100 yen just last Thursday.
The euro rose to a record against the dollar, climbing as high as $1.5903.
Japanese officials quickly called for calm in the currency markets, but did not announce any plans for intervention to shore up the greenback by buying up dollars.
"Excessive fluctuation is never favorable for the Japanese and world economy," Chief Cabinet Secretary Nobutaka Machimura said. "We are concerned about the current situation with currencies fluctuating too much."
The weak dollar hurts the country's key exporters by eroding their overseas earnings when repatriated to Japan.
stefanoc
^^ i was just talking to friends and one of them just said black monday and i found it very interesting cause im guessing the media will pitch in tomorrow just like that.
that video is just depressing. all i got to say is WOW to jim cramers suggestion. if only people understood and cared more about issues like these. everyone has put their hope of the fed without knowing what it really is. no wonder they dont understand ron pauls comments and care about obamas ex-pastor. this is worst than hollywood and its gossips!
stefanoc
the fed just ripped off the american people for its own interest and the creators.
on top of all that, bear stearns was suppose to report its earnings today (monday) and now:
NEW YORK – New York – March 16, 2008 – In light of entering into an agreement to merge with JPMorgan Chase, The Bear Stearns Companies Inc. (NYSE: BSC) will not be announcing its first quarter 2008 financial results on Monday, March 17, 2008, as previously scheduled.
the people arent even given a reason for their loss. is this unusual or is this how it usually is? arent shareholders allowed to know the financials of the company they hold a stake at by law? who gives someone the right not to publish the financials just because the company was acquired on day of the earnings report?
