Fed Comes To Rescue As Wall St. Giant Slips
Bear Stearns Gets Emergency Funds Via J.P. Morgan
By Neil Irwin and Tomoeh Murakami Tse
Washington Post Staff Writers
Saturday, March 15, 2008; A01
The Fed used a little-known power it last exercised in the 1960s to stem a run on Bear Stearns that could have sent multibillion-dollar losses cascading across the world financial system, causing more failures on Wall Street and threatening to choke off global economic growth.
The Fed’s action, arranged in a series of pre-dawn deliberations yesterday, is one of the most significant government efforts to save a private firm in modern times. The nearest parallels are the New York Fed-engineered buyout of the hedge fund Long-Term Capital Management in 1998 and the bailout of Continental Illinois Bank in 1984.
. . . If they allowed Bear to fail, the rest of Wall Street could have been dragged down with it. A major financial institution would have gone from being worth $8 billion to worthless, overnight.
In normal times, they would be inclined to let capitalism do its work. But markets are so jittery that the policymakers concluded that investors would refuse to make short-term loans to the other big Wall Street banks that rely on such debt, driving them under, too. The stock market could have experienced a collapse of 1987 proportions, and untold damage may have been done to the U.S. economy.
Actually, my old daddy was two days long on his comment–Bear Stearns has just four weeks–28 days and the financial climate within which they have to search for money is not getting any better.
So sad, watching the rich and powerful try to save their ass at the expense of the taxpayer and then label it as a “bridge to more-permanent solutions.” That’s what Bear Stearns chief executive Alan D. Schwartz termed it yesterday afternoon. Sort of like Alaska’s ‘bridge to nowhere,’ which had a puny $400 million price tag, yet outraged the country .
Mr. Schwartz is compensated by Bear Stearns to the tune of nearly $90 million annually–presumably for his bridge-building skills as well as his laser-like focus on the bank’s fraudulent security packaging.
Bear Stearns is no doubt deserving of the Bernanke-Paulson largesse. Who can forget their recent history as (according to the article)
- Leading packagers of the exotic securities linked to sub-prime mortgages at the heart of this very crisis crisis
- Federal securities regulators and the U.S. attorney in Brooklyn are investigating what Bear executives told investors about the health of its hedge funds in a pivotal April 25 conference call.
- Investigators are also looking at the transfer of personal funds by two Bear managers into safer investments about the same time.
- William F. Glavin, the secretary of the Commonwealth of Massachusetts, sued Bear late last year over alleged conflicts of interest that he says allowed the company to dump risky financial instruments into the accounts of unsuspecting investors.
- Meanwhile, Barclays Bank, the British financial institution, has sued Bear and some former employees, accusing them of hiding dire financial problems and soliciting new funds from business partners in an effort to make Bear’s failing hedge funds appear healthier than they were.
Well, there you have it. In all that hiding, mis-representing, personal greed, conflict of interest and dumping–Ben Bernanke, our bumbling Fed Chairman and Henry Paulson, Treasury Secretary and ex Chairman of Goldman Sachs, could hardly find a more deserving poster-child for taxpayer aid.
What little money remains in taxpayer hands, after Bush siphoned off $3 trillion of it in tax relief to icons of the Beranke-Paulson hue, will now be gathered to piss away on behalf of Alan Schwartz. Having swindled pension funds into fraudulently rated (AAA) investments, Schwartz and his rotten-to-the-core investment house will pay no price, serve no prison term.
You, dear taxpayer, having perhaps lost your home and having surely lost your grandchild’s legacy at the hands of these con-artists, are about to pay the price. It’s your money Bernanke is printing, your future he’s burning like a cheap cigar.
Democracy is a tough game and we are losing ours because we are simply not tough enough. Instead, we look to Hillary or Barack to bring some magical ‘change,’ an elixir to make us whole again.
We swallow the pap the New York Times or Washington Post throws our way, allowing them to frame our conversation. The Fed is not ‘coming to the rescue,’ they are bailing out a fraudulent investment bank at the expense of the citizens and telling us it’s a protection against other monsters lying in wait under our bed.
We do not need to bail out Alan Schwartz, we need to send him to jail.
Fascinated by the rantings of talk-show fanatics like Limbaugh and O’Reilly, under the thrall of preachers who pillory Clinton and Spitzer (while supporting Blackwater and Boeing), we have absolutely and utterly lost our bearings.
Sixty years ago, Eisenhower said “beware the military-industrial complex.” Thirty years ago, Martin Luther King, Jr. said we have “guided missiles and mis-guided men.”
Drop to your knees this Easter Sunday, those among you who purport to have Christian morals and ask yourselves just where it was that you left the ministry of men like King to join Jerry Falwell and Ann Coulter.
No one is going to fix this country for you. Until you stand up and throw out liars and thieves like Nancy Pelosi and Harry Reid, you’re going to have the same immoral, plundering, profiteering, rights-destroying government that has been so successful the past seven years.
They brought us to the brink of financial ruin, killed unmercifully in our name, ransacked our Constitution, terrified the world of American intentions, turned us into red and blue instead of United States and–every step of the way, we were silent.
Don’t ask Barack to do it. Barack doesn’t vote in Pelosi’s or Reid’s election. You do it, you demand jail terms for the criminals on Wall Street, you tell the feminists and the multiculturalists and the evangelicals you’ve had enough of their interference with sound education. You go to a school-board meeting, a prison-review board, a political caucus or out in the street with a sign in your hand.
Meanwhile, don’t bitch. Ben Bernanke and Henry Paulson are out there keeping the people who stole your economic legacy out of jail, with your permission.
Whether or not you let them do it is up to you.