“That’s got to tell you the economy is in a pretty precarious state.”

From the Wall Street Journal:

J.P. Morgan Buys Bear in Fire Sale, As Fed Widens Credit to Avert Crisis
Ailing Firm Sold For Just $2 a Share In U.S.-Backed Deal
March 17, 2008; Page A1

Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed — after prodding by the federal government — to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million.

Bear Stearns had a stock-market value of about $3.5 billion as of Friday — and was worth $20 billion in January 2007. But the crisis of confidence that swept the firm and fueled a customer exodus in recent days left Bear Stearns with a horrible choice: sell the firm — at any price — to a big bank willing to assume its trading obligations or file for bankruptcy.

“At the end of the day, what Bear Stearns was looking at was either taking $2 a share or going bust,” said one person involved in the negotiations. “Those were the only options.”

The sale of Bear Stearns and Sunday night’s move by the Fed to offer loans to other securities dealers mark the latest historic turns in what has become the most pervasive financial crisis in a generation. The issue is no longer whether it will yield a recession — that seems almost certain — but whether the concerted efforts of Wall Street and Washington can head off a recession much deeper and more prolonged than the past two, relatively mild ones.

Bear Stearns’s sudden meltdown forced the federal government to come to grips with the potential collapse of a major Wall Street institution for the first time in a decade. In 1998, about a dozen firms, with encouragement from the Federal Reserve Bank of New York, provided a $3.6 billion bailout of Long-Term Capital Management that kept the big hedge fund alive long enough to liquidate its positions. Bear Stearns famously refused to participate in that rescue.

From Bloomberg:

Fed Cuts Discount Rate, Expands Loans to Avert Crisis

The Federal Reserve, struggling to prevent a meltdown in financial markets, cut the rate on direct loans to banks and became lender of last resort to the biggest dealers in U.S. government bonds.

In its first weekend emergency action in almost three decades, the central bank lowered the so-called discount rate by a quarter of a percentage point to 3.25 percent. The Fed also will lend to the 20 firms that buy Treasury securities directly from it. In a further step, the Fed will provide up to $30 billion to JPMorgan Chase & Co. to help it finance the purchase of Bear Stearns Cos. after a run on Wall Street’s fifth-largest securities firm.

“It is a serious extension of putting the Federal Reserve’s balance sheet in harm’s way,” said Vincent Reinhart, former director of the Division of Monetary Affairs at the Fed and now a scholar at the American Enterprise Institute in Washington. “That’s got to tell you the economy is in a pretty precarious state.”

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303 Responses to “That’s got to tell you the economy is in a pretty precarious state.”

  1. grim says:

    From Bloomberg:

    Bernanke Plays `Whac-A-Mole’ With Turmoil in Markets

    Federal Reserve Chairman Ben S. Bernanke may be facing something worse than a loss of personal credibility on Wall Street and in Washington: waning faith in the ability of the institution he leads to turn around the economy and the financial markets anytime soon.

    Bernanke has reached deep into the Fed’s toolkit to come up with innovative ways to head off a recession and restore some calm in credit markets. While many have initially been greeted with rallies in stocks, cumulatively they haven’t yet had lasting impact on bringing down credit costs and setting the stage for economic recovery.

    “The Fed has been playing the equivalent of Whac-A-Mole as financial turmoil keeps cropping up in new and unexpected places,” says former Fed Vice Chairman Alan Blinder, referring to the arcade game where players try to hammer down plastic critters that randomly pop out of holes. “Yet many of the problems facing us are beyond its reach.”

    Home buyers are unlikely to put down offers on houses that they think will lose value — no matter how much the Fed does to lower mortgage costs. Banks with mounting loan losses will shy away from lending to borrowers they think might go bust — no matter how much money the Fed pumps into the financial system. And investors will remain jittery — even after the Fed throws a lifeline to struggling financial institutions, as it did last week with Bear Stearns Cos.

  2. grim says:

    From the WSJ:

    Banks Fear a Deepening of Turmoil
    March 17, 2008

    Many bankers are steeling themselves for the global financial crisis to both last longer and grow deeper, a shift in mood that could magnify the potential for upheaval in markets and economies world-wide.

    Just a month ago, financiers in the U.S. and Europe held out hope that the turmoil might end this year. Now, a new view is emerging: As the malaise spreads beyond risky mortgage securities and into the high-octane world of derivative investments, the pain is likely to extend well into 2009.

    Yesterday’s rapid sale of Bear Stearns & Co. to J.P. Morgan Chase & Co. — along with the Federal Reserve’s surprise Sunday-evening cut in its emergency lending rate — signals that regulators and the banking industry alike are prepared to take unusual steps to reassure financial markets. The Fed also made the rare move of saying it will lend directly to securities dealers, the first time it has done so since the 1930s.

    However, the fact that yesterday’s Bear Stearns deal puts a paltry $2-a-share value on the storied investment bank, which as recently as a week ago was trading around $70, is unlikely to assuage fears that the worst is in the past.

    The next four weeks will be critical in determining whether or not bankers’ gloomy mood is justified. Tomorrow, the worlds’ biggest banks and brokers will start reporting precisely how much money they lost in the first quarter on bad investments, on top of previous losses. These reports will also hold vital clues to what they feel the future holds.

    As last week’s meltdown at Bear Stearns shows, bankers’ mood swings can sometimes bring about the very scenarios they fear. The 85-year-old firm suffered a de facto run on the bank when nervous lenders and clients stopped doing business with it, sparking others to follow suit.

  3. grim says:

    From CNBC:

    Asian Markets Plunge on Credit Fears, Japan Sheds 3.7%

    Asian markets plunged to their weakest levels in almost eight weeks Monday, but stocks were off session lows. Japan closed 3 percent lower and Hong Kong was trading down 5 percent.

  4. grim says:

    From the NY Times:

    Rescue Me: A Fed Bailout Crosses a Line

    WHAT are the consequences of a world in which regulators rescue even the financial institutions whose recklessness and greed helped create the titanic credit mess we are in? Will the consequences be an even weaker currency, rampant inflation, a continuation of the slow bleed that we have witnessed at banks and brokerage firms for the past year?

    Or all of the above?

    Stick around, because we’ll soon find out. And it’s not going to be pretty.

    But why save Bear Stearns? The beneficiary of this bailout, remember, has often operated in the gray areas of Wall Street and with an aggressive, brass-knuckles approach. Until regulators came along in 1996, Bear Stearns was happy to provide its balance sheet and imprimatur to bucket-shop brokerages like Stratton Oakmont and A. R. Baron, clearing dubious stock trades.

    And as one of the biggest players in the mortgage securities business on Wall Street, Bear provided munificent lines of credit to public-spirited subprime lenders like New Century (now bankrupt). It is also the owner of EMC Mortgage Servicing, one of the most aggressive subprime mortgage servicers out there.

    Bear’s default rates on so-called Alt-A mortgages that it underwrote also indicates that its lending practices were especially lax during the real estate boom. As of February, according to Bloomberg data, 15 percent of these loans in its underwritten securities were delinquent by more than 60 days or in foreclosure. That compares with an industry average of 8.4 percent.

    Let’s not forget that Bear Stearns lost billions for its clients last summer, when two hedge funds investing heavily in mortgage securities collapsed. And the firm tried to dump toxic mortgage securities it held in its own vaults onto the public last summer in an initial public offering of a financial company called Everquest Financial. Thankfully, that deal never got done.

    Recall, too, that back in 1998, when the Long Term Capital Management hedge fund required a Fed-arranged bailout, Bear Stearns refused to join the rescue effort. Jimmy Cayne, then chief executive at the firm, told the Fed to take a hike.

    And so, Bear Stearns, a firm that some say is this decade’s version of Drexel Burnham Lambert, the anything-goes, 1980s junk-bond shop dominated by Michael Milken, is rescued. Almost two decades ago, Drexel was left to die.

    Bear Stearns and Drexel have a lot in common. And yet their differing outcomes offer proof that we are in a very different and scarier place than in the late 1980s.

    “Why not set an example of Bear Stearns, the guys who have this record of dog-eat-dog, we’re brass knuckles, we’re tough?” asked William A. Fleckenstein, president of Fleckenstein Capital in Issaquah, Wash., and co-author with Fred Sheehan of “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve.” “This is the perfect time to set an example, but they are not interested in setting an example. We are Bailout Nation.”

  5. grim says:

    From Bloomberg:

    Company Bond Risk Soars to Record on Fed Cut, Bear Stearns Sale

    The cost to protect corporate debt from default surged after the Federal Reserve made its first emergency weekend rate cut in three decades and a run on Bear Stearns Cos. triggered a takeover by JPMorgan Chase & Co.

    Credit-default swaps on the benchmark Markit iTraxx Europe index rose 9 basis points to a record 164 at 9:15 a.m. in London, according to JPMorgan prices. The Markit iTraxx Japan index soared 34 basis points to 245 in Tokyo after earlier reaching a record 248.

    The Fed cut the rate on direct loans to banks and became lender of last resort to the biggest dealers in U.S. government bonds in an attempt yesterday to prevent a meltdown in financial markets. It also agreed to provide as much as $30 billion to JPMorgan to help it finance the purchase of Wall Street’s fifth- largest securities firm.

    “The fear that there could be other banks in similar positions is definitely there,” said Puneet Sharma, Barclays Capital’s head of investment-grade credit strategy in London. “It’s a very, very unnerving situation.”

  6. grim says:

    From MarketWatch:

    Carlyle Capital to file to liquidate the firm

    After 19 months in business and eight months as a public company, Carlyle Capital Corp., the Channel Islands affiliate of the Washington private-equity firm Carlyle Group, said Monday it would apply under Guernsey’s companies law to liquidate the firm.

    The company late Sunday said it “received default notices from its remaining two lenders and it believes that its lenders have now taken possession of substantially all of its U.S.-government-agency AAA-rated residential-mortgage-backed securities,” Carlyle Capital said in a statement. “As a result, the company believes its liabilities exceed its assets.”

  7. SG says:

    From FT.com
    By Alan Greenspan

    We will never have a perfect model of risk

    The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.

    Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes – those belonging to builders and investors – have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.

    The American housing bubble peaked in early 2006, followed by an abrupt and rapid retreat over the past two years. Since summer 2006, hundreds of thousands of homeowners, many forced by foreclosure, have moved out of single-family homes into rental housing, creating an excess of approximately 600,000 vacant, largely investor-owned single-family units for sale. Homebuilders caught by the market’s rapid contraction have involuntarily added an additional 200,000 newly built homes to the “empty-house-for-sale” market.

    Home prices have been receding rapidly under the weight of this inventory overhang. Single-family housing starts have declined by 60 per cent since early 2006, but have only recently fallen below single-family home demand. Indeed, this sharply lower level of pending housing additions, together with the expected 1m increase in the number of US households this year as well as underlying demand for second homes and replacement homes, together imply a decline in the stock of vacant single-family homes for sale of approximately 400,000 over the course of 2008.

    We will never be able to anticipate all discontinuities in financial markets. Discontinuities are, of necessity, a surprise. Anticipated events are arbitraged away. But if, as I strongly suspect, periods of euphoria are very difficult to suppress as they build, they will not collapse until the speculative fever breaks on its own. Paradoxically, to the extent risk management succeeds in identifying such episodes, it can prolong and enlarge the period of euphoria. But risk management can never reach perfection. It will eventually fail and a disturbing reality will be laid bare, prompting an unexpected and sharp discontinuous response.

  8. grim says:

    FGIC/PMI numbers ugly

  9. IVV says:

    What amuses(?) me about this turn of events is that the Fed had to give a $30B loan for a $236M all-stock transaction. It suggests to me that Bear’s true worth was somewhere in the range of -$30B.

    And as far as I can tell, the Bear HQ didn’t have termites, a bad roof, knob-and-pin wiring, or decaying asbestos, so its value wasn’t negative. It might even have granite countertops.

  10. SG says:

    The Bottom Card


    It was probably six to nine months ago when I penned a discussion entitled “The Asset Inflation Nation.” The bottom line of that commentary was that US households had learned to “save” over the last quarter century via household asset inflation, especially the boomer generation that came of age in the late 1970’s/early 1980’s. Clearly what the boomers “learned” over the 1980’s through just recently is that equities and residential real estate values “always go up over time.” Of course what is implicit in this thought is that household asset inflation always occurs over time. Hence, actual savings out of income is much the rare commodity these days after literally a quarter century of learned experience. Visual historical experience explains this line of thinking better than words.

    It always strikes me as a good bit funny when I hear about equities and real estate values “always going up over time,” and especially from the boomer crowd. The irony, at least in my mind, is that so few realize “they were the buyers.” As the boomers came of age in the late 1970’s/early 1980’s, they did two things that drove the phenomenon of household asset inflation. They began to consistently fund IRA, 401(k), profit sharing plans, etc. Likewise, many of their employers were right alongside them funding defined benefit and contribution plans, and the like. Let’s face it; it has been a quarter century of a one-way street in terms of retirement savings contributions directed into equity buying. Of course with this tailwind, in good part this contributed to the multi-decade rise in equity prices that both helped create and reinforce the perception that equity prices always go higher. To cut right to the chase, residential real estate prices were also driven in good part by a multi-decade experience of virtually continuous boomer household formation, again leading to the popular perception that residential real estate prices always go higher. If we think about it in very simple macro terms, the baby boomers were the juice that drove the US credit cycle for a quarter century. It’s really no wonder at all that the official US savings rate ultimately plummeted nose first into the tarmac.

  11. reinvestor101 says:

    Alan Greenspan needs to come back to save the day. We wouldn’t have had these problems with Greenspan at the helm. He would know what to do. Bernanke is just foundering around confused. The fact that he let JP Morgan acquire Bear for 10 cents on the dollar will create more fear and panic than not. The man has no sensitivity as to how to handle things such that people are resssured and calmed down.

  12. IVV says:

    Is JP Morgan acquiring Bear for 10 cents on the dollar a more fearsome outcome than Bear declaring backruptcy? Because those were the available outcomes, it seems.

  13. njpatient says:

    Mornin’ fellas

  14. njpatient says:

    Feels like a lucky shamrock day!

  15. reinvestor101 says:

    Letting Chase get away with that causes everyone to question the value of investment banks. How is it that a company worth billions a few days ago is now only worth $ 200 million? That is not reassuring and makes people question the value of other investment banks.

    It should have been handled differently. You don’t let someone rip off shareholders in this manner

    IVV Says:
    March 17th, 2008 at 6:40 am
    Is JP Morgan acquiring Bear for 10 cents on the dollar a more fearsome outcome than Bear declaring backruptcy? Because those were the available outcomes, it seems.

  16. SG says:

    I am no expert, but what do you all think was FED’s role in BS saga?

    Did Fed know of buy out? or were they taken for ride as well?

  17. grim says:

    From MarketWatch:

    Bond insurer FGIC reports $1.89 billion loss, eyes re-org

    Bond insurer FGIC Corp. reported a $1.89 billion quarterly loss, mostly on loss and loss adjustment expense reserves and mark-to-market losses recorded for the quarter. The increase in loss reserves for the quarter stemmed from the rapid and substantial deterioration during the quarter in the performance of certain RMBS and ABS CDO transactions written primarily in 2006 and 2007. FGIC anticipates that any claims relating to these transactions will be made over a period of years. FGIC has ceased writing new financial guaranty business for a period of time to preserve capital and has hired Goldman Sachs to provide advice. In addition, FGIC has proposed a significant restructuring of its insurance operations to the New York Insurance Department, including the organization of a new financial guaranty insurer to be domiciled in New York to provide support for global public finance and infrastructure obligations previously insured by FGIC and to write new business to serve those markets.

  18. grim says:

    Still early, but interesting..

    From MarketWatch:

    Lehman Bros. shares fall 18.5% to $32 in pre-open trade

  19. SG says:

    Anger, relief, worry: Bear Stearns staff fear for jobs

    HONG KONG/SINGAPORE (Reuters) – Stunned dealers and traders at Bear Stearns, the ailing U.S. investment bank rescued by rival JPMorgan Chase & Co, turned up for work on Monday to find the value of their stock options in tatters and the future of their jobs up in the air.

    The fear of job losses among bankers, traders and other staff comes as Wall Street grapples with a deepening credit crisis and the threat of recession in the United States grips financial institutions.

    Bear Stearns, roughly 30 percent-owned by its staff and proud of its above average level of inside ownership, employs 14,000.

    JPMorgan is paying just $2 a share for the 85-year-old Bear, valuing the fifth-biggest U.S. investment bank at $236 million — just one-fifteenth of its market value on Friday and way below its record share price of more than $172 last year.

    “The valuation is virtually nothing, it is indeed rock bottom. We have tanked — it’s very, very sad. Everyone is in mourning,” said a Singapore-based Bear Stearns employee.

    The bailout punctuates an eight-month slide in Bear Stearn’s fortunes as investors lost confidence in the Wall Street bank, the smallest of the major securities houses and one known as an aggressive trader in credit and mortgage markets.

    “We’ve just been told we are JPMorgan employees. The valuation is obviously not that good — they’re paying just $2 a share, its effectively a wipe-out. A lot of people here own stock options,” said a Bear Stearns trader in Hong Kong.

    To add insult to injury, Bear Stearns does not offer payouts, known as ‘golden parachutes’, for executives in the event of it being taken over.

  20. IVV says:

    re101 (16):

    Bear stock was already worth nothing. The JP Morgan acquisition allows Bear’s debt holders some reassurance that they can get their money back out.

    If Bear were allowed to go bankrupt, the equity holders would still have nothing, and the debt holders would have to send the credit markets into further convulsions as they tried to pull any value out of the organization–it would be akin to dogs fighting over bare bones.

    The big questions, as I see it, are why should JP Morgan receive any benefit, and would involving any other party be any more acceptable. Should Bear have been nationalized? Does a government-run I-bank sound like a good idea? Should GS have gotten Bear instead? How about Citic or some foreign bank? Would any of those situations be better?

  21. reinvestor101 says:

    This is what happens when the Fed handles things incorrectly. Bernanke’s bungling here has resulted in a crisis of confidence. You don’t simply give away one wall street investment bank to another like what was done here. Things should have been handled differently.

    Calls will increase to bring Greenspan back.

    The buyout was aimed at averting a bankruptcy and a spreading crisis of confidence in the global financial system sparked by defaults in the U.S. subprime mortgage market.

    But to Asian investors the move suggested that the credit woes are far from over and fanned worries that other big American banks are facing serious troubles.

    “There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted,” said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.


  22. grim says:

    From MarketWatch:

    Bank of China chief says U.S. subprime crisis has yet to run course

    The U.S. subprime crisis has yet to run its course but its impact on Chinese financial institutions is limited, Bank of China Ltd. (3988.HK) Chairman Xiao Gang said Monday.

    “The conditions will be worsening and we should still closely watch any fallout of the subprime crisis,” Xiao told reporters on the sidelines of the Chinese parliament’s annual convention.

    Xiao said Bank of China, which has the largest exposure to subprime-related investments among major listed Chinese lenders, would be cautious about future acquisitions overseas.

    “We don’t have any plans to buy into companies that have been hard hit by the subprime crisis,” Xiao said.

  23. Mikeinwaiting says:

    re 101 Don’t you get it Greenspan is the won who let this disaster happen.BB inherited it.Not to say he’s done great but was dealt a really shitty hand.

  24. Rob says:

    The Fed knew. They have now devolved into a plate-spinning act.

    My guess is that Lehman is next. They are levered about 40:1. Ka-pow!

  25. Calls will increase to bring Greenspan back.

    Only to stand trial.

  26. Essex says:

    I’m confident that reinvestor is a troll

  27. Pat says:

    RE: bleeding hearts for Bear 401(k) peons from Lowball thread 209, 213. Don’t cry for them, Argentina. The safest place for the employee’s money over the last few months has been the ESOP/ER stock fund.

    It’s the insured fund.

    They’ll get back 68-69 cents on the dollar once the fiduciary liability insurance pays up on their non-diversification suit.

    The plans should hit one of the lists within a quarter:

  28. njrebear says:

    Temper-Pedic says mattress sales in ‘unprecedented’ slowdown

  29. Grim, you weren’t kidding about PMI’s Q4 being ugly.
    A loss of $12.51 per share… What happens should these guys go under?

  30. grim says:

    Fed-funded, $2 a share, buyout by the Barney Frank Resolution Trust Corp.

  31. grim says:

    From Reuters:

    PMI posts $1 billion quarterly loss

    Mortgage insurer PMI Group Inc reported its biggest ever quarterly loss, primarily due to losses from its investment in bond insurer FGIC Corp, and slashed its quarterly dividend by over 70 percent.

    PMI , which had rescheduled its quarterly results , said fourth-quarter net loss was $1.0 billion, or $12.51 a share, compared with net income of $100.5 million, or $1.19 a share, in the year ago period.

    Analysts expected the company to post a loss of $3.37 a share, according to Reuters Estimates.

  32. njrebear says:

    Siemens says earnings to drop by $1.4 billion
    Industrial powerhouse cites delays, order cancellations; shares slide

  33. grim says:

    From the AP:

    PMI Sees Claims Up to $975M in 2008

    PMI Group Inc. said it expects paid claims for its U.S. mortgage insurance operations to be between $825 million and $975 million.

    Earlier Monday, the Walnut Creek, Calif., mortgage insurer reported a $1 billion fourth-quarter loss, mostly on equity losses in its stake in troubled competitor FGIC.

    PMI paid $114.5 million in claims in the fourth quarter, nearly double a year ago.

  34. grim says:

    I can’t even fathom the massive dislocation in the secondary mortgage markets that would ensue if PMI Group failed. We no longer have adjectives strong enough to describe the fallout.

  35. Rob says:

    “We no longer have adjectives strong enough to describe the fallout.”

    What do you mean, “biblical”?
    Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath of God type stuff.
    Dr. Peter Venkman: Exactly.
    Dr Ray Stantz: Fire and brimstone coming down from the skies! Rivers and seas boiling!
    Dr. Egon Spengler: Forty years of darkness! Earthquakes, volcanoes…
    Winston Zeddemore: The dead rising from the grave!
    Dr. Peter Venkman: Human sacrifice, dogs and cats living together… mass hysteria!

  36. Mikeinwaiting says:

    ROB Classic!LOL!

  37. Clotpoll says:

    Wibur Ross takes down OptionOne’s servicing arm. A pure cash cow, at a pittance…

  38. Clotpoll says:

    Watch Buffett and Ross now. It’s a wide-open field for the vulture and value guys.

  39. HEHEHE says:

    Frankly Bernanke has nothing left unless they’ve been secretly working on a time machine. By the end of the week you might see S&P 1000.

  40. Stu says:

    Deep recession or possible depression more likely every day.

    Spring selling season without available credit has not yet occurred. Perhaps trade in loafs of bread or gold nuggets for neighbors home.

    Happy St. Patrick’s day everybody.

  41. Stu says:

    So when is the mass withdrawal of 401K and IRA equities going to occur and how is that going to impact business. I would guess that will occur when Wamu folds. These are crazy times. Remind me to stop by the Home Depot on the way home to pick up a very mature apple tree and some barbed wired.

  42. Clotpoll says:

    ReTard (11)-

    “The man has no sensitivity as to how to handle things such that people are resssured and calmed down.”

    Tard, there are more than a few folks on this board who are short/double short the market and the most sensitive sectors of the market, long commodities, long precious metals. How did we sleep last night? Pretty well, actually.

    Atta boy, Bergabe. Keep doing what you do.

    BTW, before you accuse me of grave-dancing, please know that my day today will consist of negotiating two more pi$$-poor short sale offers. Two more families to be cast adrift. Two more giant buckets of loss (both CFC loans, natch). There is absolutely no pleasure in that.

  43. Clotpoll says:

    Tard (16)-

    “How is it that a company worth billions a few days ago is now only worth $ 200 million?”

    Uh…could it be because their assets- pledged as collateral and superleveraged- are worthless?

  44. Frank says:

    Can you imagine the decline in RE values around NYC? I am buying a 3 bedroom condo in Hoboken for $100K and a brownstone on Upper East side for $300K by the end of this year.

  45. chicagofinance says:

    Enough…………pop a Xanax and get to work….

  46. chicagofinance says:

    chicagofinance Says: Your comment is awaiting moderation.
    March 17th, 2008 at 8:20 am
    Enough…………pop a chill pill and get to work….

  47. Clotpoll says:

    SG (17)-

    They picked the winner. All they had to do was announce that they preferred the institution who would take over BSC be a major bank.

    Word is, Dimon’s bid went from $15 to $2 on that news.

  48. chicagofinance says:

    Clotpoll Says:
    March 17th, 2008 at 8:20 am
    Tard (16)- “How is it that a company worth billions a few days ago is now only worth $ 200 million?” Uh…could it be because their assets- pledged as collateral and superleveraged- are worthless?

    (MV) A = (MV) L + (MV) SE
    A – L = SE

    you fill in the variables

  49. chicagofinance says:

    actaully……I am going to correct the above:
    (MV) A = L + (MV) SE

    you owe what you owe…..nobody cares what someone will buy it for….

  50. Clotpoll says:

    Tard (23)-

    Yeah, the resignation of the Fed chairman should really calm things down.

    As if.

    You really are a piece of work.

  51. Clotpoll says:

    Rob (26)-

    “My guess is that Lehman is next. They are levered about 40:1.”

    The scary thing is, about 12-18 months ago, 40:1 leverage didn’t cause anyone to raise an eyebrow. It was SOP.

    I guess this is what a systemic margin call feels like.

  52. HEHEHE says:

    “Frank Says:
    March 17th, 2008 at 8:20 am
    Can you imagine the decline in RE values around NYC? I am buying a 3 bedroom condo in Hoboken for $100K and a brownstone on Upper East side for $300K by the end of this year.”

    Come on Frank, why limit yourself, you forgot to include your choice of recently divorced trophy wife and designer dog.

  53. Sean says:

    Beware the ides of March.

  54. Confused In NJ says:

    51. Clot

    Tard has a point, call AG back and have the 7 FEDS sacrifice him, with TV coverage. They can burn him at the stake as a witch (warlock), which will appease the people, knowing that the Evil has finally been destroyed. A crisis of Biblical Proportions requires a Biblical Solution.

  55. John says:

    Why so high? Last RE crash when NYC was almost bankrupt my cousin was buying Park Slope Brownstones from NYC for 40K a piece.

    Frank Says:
    March 17th, 2008 at 8:20 am
    Can you imagine the decline in RE values around NYC? I am buying a 3 bedroom condo in Hoboken for $100K and a brownstone on Upper East side for $300K by the end of this year.

  56. HEHEHE says:

    Its a always a bad sign when the talking heads on CNBC are dejected at 8 am. I wouldn’t be surprised to see a hlat in trading some time this week.

  57. Sean says:

    Heard Jim Rodger’s this morning on Bloomberg, he was livid that the Fed came in with a cash bailout and that the Bear gave out bonus checks 6 weeks ago.

    reinvestor get used to hearing this word. —> Fraud.

  58. mr potter says:

    Who on this board predicted that a major Wall St firm would go under in 2008 ?

  59. John says:

    We all know how this will play-out, this week will be a once in a lifetime rout, the retail investors over the three day weekend will enter sell orders and the markets will fall even more for a few weeks and then we will have a summer recovery.

    In the next few weeks you will see a once in a lifetime opportunity to buy blue chip bonds and munis at record low valuations.

  60. Jamey says:

    Jeziz! Rate cuts are to the [politicized] Fed what tax cuts are to the Republicans.

    Oldsters are freaking out. I do my grocery shopping early Sunday morning, and I hear packs of seventy-somethings complaining about the price of food, the piss-poor rates of return on their fixed retirement income investements, and the declining value of their houses.

  61. Jamey says:


    I did. Approx 16 mos ago, in idle chatter. No analysis, just a question about any major funds/Wall St houses heavily pushing REIT.

    But it was the case of a broken clock being right …

  62. grim says:

    Keeps getting better.

    From Bloomberg:

    New York Fed March Factory Index Falls to Record Low

    measure of manufacturing in New York state fell to the lowest level on record in March as new orders and shipments contracted for a second month.

    The Federal Reserve Bank of New York’s general economic index fell to minus 22.2 from minus 11.7 in February, the bank said today. Readings below zero signal contraction and the March level was the lowest since the New York Fed’s index began in 2001. The index averaged 17.2 in 2007.

    Manufacturing is weakening along with the broader economy as home construction falls for a third year, carmakers cut back on output and consumers slow spending. The Fed, trying to ease a credit squeeze that’s probably pushed the economy into a recession, yesterday cut the rate on direct loans to banks and became lender of last resort to the biggest dealers in U.S. government bonds. Policy makers meet to consider further moves tomorrow.

    “Manufacturing has not just skidded to a halt, it is in outright decline as Wall Street’s problems now threaten the broader economy,” said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The Fed will need to keep cutting rates as so far the monetary stimulus has not improved the sentiment of business and consumers.”

  63. John says:

    The New York Stock Exchange imposes trading halts in the event of extreme market volatility.
    The so-called circuit breaker rules first went into effect following the 1987 market crash. The rules call for trading halts of differing lengths in the event of declines of 10%, 20%, and 30% in the Dow Jones Industrial Average (INDU) based on the average closing value of the average over the month immediately prior to the start of the current quarter.
    For the current quarter the rules call for a 60-minute halt in trading in the event of a 1,350 point decline in the Dow Jones Industrial Average reached before 2 p.m.; a 30-minute halt in the event of a 1,350 point decline reached between 2 p.m. and 2:30 p.m., and no halt in trading in the event of a 1,350 decline reached after 2:30 p.m.

    The timing of the halts changes in the event of a larger decline. The rules call for a 120-minute halt in trading in the event of a 2,700 point decline in the Dow Jones Industrial Average reached before 1 p.m.; a 60-minute halt in the event of a 2,700 point decline reached between 1 p.m. and 2 p.m.; and market closure in the event of a 2,700 point decline reached after 2 p.m.

    A decline of 4,000 points in the Dow industrials at any point during the day would trigger closure of the market for the remainder of the day.

  64. grim says:

    Is it possible that when Paulson was talking about a “strong dollar” he meant it in a physical sense? As in, “difficult to tear up”?

  65. If the market somehow closes in positive territory today I may finally believe that the PPT is really running things.

  66. Clotpoll says:

    grim (36)-

    Can you say “mandatory 20% downpayment”?

  67. grim says:

    From MarketWatch:

    New York factory activity slows to record low level in March

    Manufacturing activity in the New York area fell to a record low level, the Federal Reserve Bank of New York said Monday.

    The bank’s Empire State Manufacturing index fell to a reading of negative 22.2 in March, down from negative 11.7 in February.

    Economists had been expecting the index to rebound slightly to a negative 5.0 in March after it plunged in February from 9.0 in January.

  68. Clotpoll says:

    confused (56)-

    And, he’s a Jew, to boot.


  69. grim says:

    If the market somehow closes in positive territory today I may finally believe that the PPT is really running things.

    On hopes that the Fed cuts 125 bps tomorrow.

  70. Clotpoll says:

    meester (60)-

    Pretty much everybody.

  71. grim says:

    (bi on)

    C’mon guys, nothing to worry about, Bear didn’t go under.

    This was a merger.

    And everyone knows mergers are a sign of strength in the market.

    This must be the bottom!

    (bi off)

  72. Clotpoll says:

    grim (71)-

    Why not an emergency 75 bps cut today?

    Hell, they did it within days of a meeting just a few weeks ago.

  73. Rich In NNJ says:

    From MarketWatch:

    Fed fund futures imply 90% chance of 2% Fed rates

  74. Rich In NNJ says:


    LONDON (MarketWatch) — April-dated fed fund futures contracts rose 11 cents to 97.98 — implying a 90% chance that the Fed will slash its base rate to 2%.

  75. Confused In NJ says:

    70. Clot

    The members of the Economic Cabal have No Souls, Cast No Reflections, and are Affiliated only with Satan. They may pretend to be Christian, Jew, Muslim, Buddist, Hindu, but the absence of a reflection negates their past life.

  76. grim says:

    Lehman down 35% now (premarket)? Ouch.

  77. Stu says:

    Scary things:

    Fed bailing out an investment bank.
    Fed couldn’t wait one more day to lower discount rate (holy panic).
    Extension of FED 28 day loan period to 90 days.
    Cinnamon Life cereal depleted at breakfast this morning.

  78. grim says:

    Even scarier?

    My wife took down the “blood in the streets” post-it note she put on my monitor as a joke a few months back.

    (The note was in response to my prodding her to move on a short-sale deal that I thought represented good value in the current market. I was trying to pressure her to agree to move forward with making an offer, she vehemently disagreed with me, telling me that she wouldn’t even think of making offers until there was “blood in the streets”. The next morning I found the post-it on my monitor.)

  79. SG says:

    I don’t understand obsession with Fed rate cuts. It has done nothing in last few months to ARM loan rates or Fixed rates. In fact, it has declined value of Dollar, increased Oil and Gold prices.

    One observer on CNBC in morning noted, ECB has not cut rates, and their markets have performed similar to US markets. If Credit was concern, then Fed should have done similar to ECB by supplying $500 billion Credit.

  80. grim says:

    I don’t understand obsession with Fed rate cuts.

    Heard an unremarkable analyst on Bloomberg who said the Fed cuts tomorrow should settle the market.


    I have a feeling that job was the prize in a box of a Cinnamon Life.

  81. grim says:

    WAMU down 16% in premarket, Countrywide down 17%.

    BOA must be thrilled this morning.

  82. Jason says:

    Nice Ghostbusters reference earlier on. But I was reminded of another movie last night as the Bear news was breaking:

    The vision dims and all that remains are memories. They take me back – back to the place where the black pump sucked guzzolene from the earth. And I remember the terrible battle we fought – the day we left that place forever. But, most of all, I remember the courage of a stranger, a road warrior called Max.

    To understand who he was, you must go back to the last days of the old world, when, for reasons long forgotten, two mighty warrior nations went to war and touched off a blaze which engulfed them all. For without fuel they were nothing. They had built a house of straw. People stopped in the streets and listened: for the first time they heard the sound of silence. Their world crumbled.

    And only those mobile enough to scavenge, brutal enough to pillage would survive. At last, the vermin had inherited the earth. And in this maelstrom of decay, ordinary men were battered and crushed.

    Men like the Warrior Max, who in the roar of an engine, lost everything and became a shell of a man. A burnt out, desolate man, a dead man, running from the demons of his past. A man who wandered far away. And it was out here in this blighted place that he learned to live again.

  83. John says:

    Countrywide shares fall 17% in pre-open trade to $3.72

    BOA is going to back out or reneg deal, or since CFC is based on value of BOA stock which is in tank CFC is falling.

    Jaimie may do a two way deal in a few weeks and pick up Wamu for two bucks also.

    Maybe his strategy is to only buy shares of blue chip companies when they are trading for less than a slice of pizza.

  84. Clotpoll says:

    Great. Here come the Mad Max analogies.

  85. Rob says:

    Blue chip? More like chipped beef.

  86. Clotpoll says:

    grim (83)-

    Fed rate cuts = exit points for those long equities = entry points for short-sellers

  87. SG says:


    So JP Morgan has agreed to buy Bear Stearns at $2 a share. As others have already pointed out, this is, from the point of view of the shareholders, just barely better than bankruptcy. Talk of a bailout of the bank is silly–this wasn’t a bailout; it was an orderly winding-up of business.

    There’s an argument, of course, that successive Fed interventions, starting with the Russian bond crisis, have turned bankers into ever-greater risk takers, making each crisis bigger and more expensive than the last. The thinking goes that we need to draw the line here, whatever the cost, because if we let the financiers go on their merry way, eventually they’ll create a wave that will swamp the Fed’s power to intervene. Possibly so, but from what I hear, the people on Wall Street are pretty much scared right down to the tips of their Gordon Gekko underoos.

    In some sense, right now it’s the Fed’s job to manage that fear–to scare them enough to ratchet back their risk profile, without scaring them so badly that they hunker down inside their weekend house and refuse to buy or sell anything. That’s very tricky, and since in the long run we’ll all be dead, I’d rather the Fed err slightly on the side of cheering them up. Perhaps Helicopter Ben should start pumping anti-depressants into the Wall Street water supply.

    Because while we have, as I say, averted one gigantic disaster, there are still plenty of potential other ones waiting in the wings. The Bear buyout sends reassurance about the fate of its trades–but the Bear collapse, for all that it has been rumored for months, could send a fresh wave of fear through the markets. In the very short term, I’d imagine the buyout will improve matters in our markets (though Asian bank stocks are trading down), but as the week and the month unfold? Well, I’m glad I’m not in the prediction business.

  88. par4156 says:

    If the mortgage insurance companies fail, will 100% financing come back or will a new standard of say a 10% downpayment be set as the acceptable or “normal” risk by lenders? I guess the Fed saw this coming…all the hard work to push up the government backed loan limit.

  89. John says:

    1:00 Housing Market Index

    The National Association of Home Builders produces a housing market index based on a survey in which respondents from this organization are asked to rate the general economy and housing market conditions. The housing market index is a weighted average of separate diffusion indexes: present sales of new homes, sale of new homes expected in the next six months, and traffic of prospective buyers in new homes. (National Association of Home Builders/Wells Fargo) This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the housing market index, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Whether the housing market index reflects new home sales or home resales, once a home is sold, it generates revenues for the realtor and the builder. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic “ripple effect” can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

  90. grim says:

    From MarketWatch:

    U.S. Feb. industrial production falls 0.5%

    U.S. industrial output dropped by 0.5% in February, the Federal Reserve reported Monday. The decline was largely a result of a weather-related 3.7% decline in utilities’ output. Analysts surveyed by MarketWatch were looking for an overall decline of 0.2% in February. The capacity utilization rate, meanwhile, fell to 80.9% from 81.5%.

  91. par4156 says:

    That smug feeling I had when I bought at 10% under asking evaporated when I saw a house in my neighborhood at an asking price pretty close to my “deal.” Got a little relief when I realized it was a “value in the land” deal (big lot). Still, it’s sobering.

    I am now clutching at the “…my house has more character” position. I guess landscaping is the only improvement we’re doing this year.

  92. grim says:

    What is the probability that Bernanke turns into Volcker at the FOMC meeting tomorrow and holds rates flat, citing rising inflation and a weak dollar?

    I know, I know, I couldn’t help but giggle as I wrote that.

  93. njrebear says:

    Inflation is 0%.

  94. Essex says:

    Post 53…and 56.

    My loooooooooord! You guys are hilarious.
    Seriously, you should should both write for the Simpsons. You are that funny.

  95. Stu says:


    Bought in September of 2004 for 480K. House initially assessed the next year at 650K. Of course we fought it down to 580K. Calculating a 30% drop from there equals 406K. Not upside down yet since we really got a great deal, but factored in about $75K of discount when we purchased the home. Too bad 75K only represents a 15% drop.

    I suppose, I’ll just have to justify it by reassuring myself that although I’m 15% in the hole, I’m still 15% ahead of everyone else who purchased in September of 2004.

    Actually, until you sell for a loss, you are not really in that much pain.

    Though, now I can more clearly see why jingle mail will become a more and more popular option going forward. Now remind me why I put 20% down? Well I suppose, my loss in value of my downpayment is still less than the loss would have been had I been long the stock market.

    I must keep justifying!

  96. grim says:

    Inflation ex. inflation is always 0%

  97. njpatient says:

    “60. mr potter Says: March 17th, 2008 at 8:39 am
    Who on this board predicted that a major Wall St firm would go under in 2008 ?”

    Me (among many here)

  98. Stu says:

    Plagerized from a yahoo message board:

    Bear Stearns is renamed as “Metrocard Financials”…. $2.00 for a single ride….

  99. njrebear says:

    we will close positive today.

  100. Jcsidelines says:

    Who has the best data regarding price to rent ratios, and how far are you able to drill down with that info? Zipcodes?

  101. njpatient says:

    66 grim


  102. John says:

    LONDON (MarketWatch) — The rise in Fed fund futures Monday morning not only suggests that a one-percentage-point cut to 2% in the Fed funds rate is fully priced in, but that there’s a slight chance of the Fed cutting its base rate to 1.75%. The April Fed fund futures contract rose to 98.03. Community

  103. Essex says:

    101. Whew! Thank Goodness.

  104. HEHEHE says:

    You see all the action in the oil services and comm0dity space, people must be getting some serious margin calls or simply pulling cash?

  105. par4156 says:

    Fortunately we bought for the long term and spent alot of time crunching the numbers. At times we had to insist on certain things with the bankers. We only put 10% down and the bank kept pushing a HELOC for the second lien. Took forever to convince the salesman that i wanted a fixed rate second loan. Thing is…the fixed rate loan was lower than the HELOC…go figure. Initially we wanted a “starter” home…but decided on something we could live in for 30 years with minor changes (add deck, upgrade kitchen, etc).

  106. grim says:


  107. Victorian says:

    This is like watching the Bourne Ultimatum, my fingernails are gone.. :). Who needs TV when you have Wall St.

  108. skep-tic says:

    from today’s WSJ:

    “Officials grimly concluded that while Bear Stearns wasn’t too big to fail, it was too interconnected to be allowed to fail in just one day….

    “To reassure the markets and Bear Stearns’s counterparties, Fed officials wanted the investment bank’s buyer to be able to announce at the same time as the purchase that it would stand behind all of Bear’s agreements in the repo, derivative and securities lending markets.”


    Is this really a good deal for JPM?

  109. grim says:

    From the AP:

    Sector Glance: Mortgage Lenders Fall

    Shares of mortgage lenders and financiers declined on Monday as the broader market fell on concerns over JPMorgan Chase & Co.’s government-backed buyout of Bear Stearns Cos.
    Fannie Mae shares tumbled $2.42, or 10.8 percent to $19.94. Shares hit a new year low of $18.25 earlier in the session.

    Shares of Freddie Mac fell $2.38, or 11.2 percent, to $18.80.

    Countrywide Financial Corp. shares stumbled 40 cents, or 8.9 percent to $4.10. Shares hit a new 52-week low of $3.95 earlier in the session.

    Shares of IndyMac Bancorp Inc. fell 49 cents, or 9.3 percent, to $4.81.

  110. Jill says:

    For those of us who are not in the world of high finance but who have IRAs and 401(k) and related plans: Where should we be right now? I have an IRA with Morgan Stanley; should I pull it out and put it in a CD at Hudson City? I’m less concerned about TIAA-CREF, but what should those of us who can ill afford to lose everything we have do right now?

  111. Rich In NNJ says:

    From Bloomberg

    UBS Drops Most in Nine Years on Report of Job Cuts

    UBS AG , Europe’s biggest bank by assets, fell the most in more than nine years in Swiss trading after reports that the company may cut as many as 8,000 jobs, propose a new capital increase and sell businesses.

    [Emphasis added]

    Many of these cuts WILL be in the NYC area.

  112. skep-tic says:

    from WSJ Deal Journal Blog:

    “Cavanagh [JPM CFO] also clarified that J.P. Morgan is taking on $33b worth of gross exposures because of Bear, including about $9b or so in leveraged lending exposures.”

  113. HEHEHE says:

    With Lehman down 20% who is the Fed going to find to buy them?

  114. John says:

    03/17 10:22 Makers of Guinness Stout Take Plea to Washington – Request St. Patrick’s Day Receive National Holiday Recognition Iconic Irish Beer Maker Appeals to Lawmakers with Over 250,000 Supporters
    WASHINGTON, March 17 /PRNewswire/ — While presidential politics continue to be a point of debate, Americans of all ideologies have come together in a show of unity for Proposition 3-17, a national effort to make St. Patrick’s Day an officially-recognized holiday in the United States. In just a few short weeks, a groundswell of public sentiment from all corners of the country generated more than a quarter million signatures in support of the proposal.
    “We’re proud to sponsor Proposition 3-17,” said Richard Nichols of Diageo, makers of Guinness beer. “The widespread support for this initiative, which really appears to be across party lines, shows that Americans want to come together to celebrate a wonderful day and the Irish spirit that lives inside all of us.”
    Guinness stout is the iconic Irish stout and a strong supporter of celebrating St. Patrick’s Day in a socially responsible way. Guinness Brewmaster Fergal Murray met Rep. Jim Crowley (D- NY) to discuss the idea of making St. Patrick’s Day a national holiday, and presented him with Proposition 3-17 petition signatures. Murray had spent the past two weeks touring the U.S. to rally support for the cause.
    “It was a true honor to meet Guinness Brewmaster Murray and see first-hand the great support across the nation for Proposition 3-17,” said Congressman Crowley. “While celebrating St. Patrick’s Day this year, I hope leaders from both sides of the aisle consider supporting a national holiday to celebrate Irish culture.”
    According to a recent survey of men and women 21 years of age and older, 54% of respondents with Irish ancestry plan to celebrate St. Patrick’s Day this year and almost a third of U.S. residents who don’t claim Irish ancestry plan to celebrate St Patrick’s Day as well. Proposition 3-17 calls on the nation’s leaders to grant the wish of the many people around the country who desire to spend the day celebrating with family and friends.
    The survey, commissioned by the makers of Guinness stout, also revealed that presidential hopefuls Hillary Clinton, Barack Obama and John McCain are among the people men and women across the country would like to raise a pint with this St Patrick’s Day.
    Diageo, the makers of Guinness stout, are the industry leader in social responsibility advocacy and encourage those who do decide to celebrate with a pint on St. Patrick’s Day to do so responsibly. The petition is only open to adults 21 and over, and supporters can continue to join the cause by logging onto http://www.Proposition317.com.

  115. par4156 says:

    I remember when a 10,000 DOW looked like a full recovery…now 10,000 DOW looking like a possible bottom this summer. Second oppertunity for anyone that missed the run up last time???

    All the major international indices down. In developing countries (read- India, China, South America) core inflation hitting hard, cost of business going up (including salaries), perhaps some long term benifit for the US economy? I know that Caribbean countries are seeking exemptions from Euro and Caricom Basin trade deals to get cheaper imports from the US. It must be getting cheaper for mutinationals to keep jobs in the US…right?

    The next president might be walking right into a nice macro economic situation!

  116. chicagofinance says:

    Jill Says:
    March 17th, 2008 at 10:36 am
    For those of us who are not in the world of high finance but who have IRAs and 401(k) and related plans: Where should we be right now? I have an IRA with Morgan Stanley; should I pull it out and put it in a CD at Hudson City? I’m less concerned about TIAA-CREF, but what should those of us who can ill afford to lose everything we have do right now?

    Jill: #1 you are not my client; you do not compensate me; you cannot hold me liable for any advice I state here; you must call Morgan Stanley your service provider for advice.
    #2 throw your statement for March in the sock drawer when you get it in the mail – DO NOTHING – thank me later….as in 2009

  117. Sybarite says:

    DJIA positive!

  118. chicagofinance says:

    FYI – DJIA is green…

  119. njpatient says:

    From a guy at Rogers Holdings in Singapore on NPR this morning – nothing you haven’t that of before, but nicely put.

    “If people make mistakes, they should go bankrupt – there’s nothing wrong with bankruptcy.”

    What should the Fed do, then, instead of their present policy?

    “They should all resign.”

    But if they don’t act to prop up the market the whole financial system might collapse.

    “There’s nothing wrong with the financial system collapsing. It happened in Japan in 1966, and they got over it.”

    “All this nonsense of interest cuts and bail-outs will just make the ultimate collapse worse.”

    “Why should ordinary Joes fork out so that rich people can keep their Maseratis?

  120. Stu says:


    There are various ways to hedge your investments to avoid any losses.

    Or you can always move the entire nut into (relatively safe) bonds.

    Though I do think at this point, unless there is a depression, a lot of the downside pricing of equities might have already occurred. Lead the herd, don’t follow it.

  121. njpatient says:

    “Many of these cuts WILL be in the NYC area.”

    But not in Manhattan!

  122. njpatient says:

    “FYI – DJIA is green…”

    Shwoo – everything is going to be just fine after all!

  123. Stu says:

    And Ann,

    Listen to Chifi.

    Reassure yourself by looking at a 100 year chart of the DOW.

    As bad as the market looks. When we are old and gray, the 2000-2010 decade will probably be a near undecipherable bump in the long term chart of the markets.

  124. grim says:

    Of course the DJIA is green.

    St. Patty’s Day

    Would be disrespectful if the tape was red all day.

  125. njpatient says:

    126 grim

    “St. Patty’s Day”

    I’m wearing my shamrock tie, my shamrock cuff links, my green socks with pints of guinness, and my green boxers.

  126. Richie says:

    Any wagers on who’s going down next?

    Citibank? They seem like they’d be stupid enough to make the same mistakes that Bear made.

  127. skep-tic says:


    I think this BSC maneuver has really raised the level of public awareness regarding the degree to which the Fed is manipulating markets. Given that we have entered what appears to be a nasty recession in the middle of an election year, the Fed is really pushing the line here in terms of what the general public is willing to tolerate. Most people already believe “the system” is rigged against them (and in favor of “the rich”). The Fed’s recent actions only reinforce this perception.

  128. njpatient says:

    125 Stu

    “When we are old and gray, the 400-410 decade will probably be a near undecipherable bump in the long term chart of the markets.”
    –Emperor Honorius, 408 A.D.



  129. thatBIGwindow says:

    omg omg panic time. I am liquidating my 401k and stuffing the money in the box spring of my mattress.

    all disclaimers

  130. njpatient says:

    grim – unmoderation help at 131?

    What tripped me up?

  131. njpatient says:

    129 Rich
    “Any wagers on who’s going down next?”

    I’d love to but I’d get fired.

  132. njpatient says:


  133. njpatient says:


  134. njpatient says:

    130 skep

    100% right
    and right on cue, here’s Atrios:


    Alan Greenspan goes for another round of “IT’S NOT MY FAULT WAHHH.”* And, of course, in our current corrupt and depraved system, nobody “serious” will try to hold him or anyone else accountable. Poor Uncle Alan, he couldn’t have known and he couldn’t have done anything if he did.

    I was thinking about the housing bubble and why most of the “experts” failed to see that there was a problem, and I realized it’s because they’re all rich. There was one unavoidable and obvious fact that was apparent to anyone who isn’t especially rich, and that’s that there was no possible way that many households in this country had large enough incomes to be able to afford the monthly mortgage payments they were supposed to be paying, even without ridiculous interest rate resets. There just aren’t enough people who make enough money to support that many $800,000 homes.”

    * links to Greenspend’s FT article

  135. par4156 says:

    Re: “Any wagers on who’s going down next?”

    1. national economies heavily dependant on middle market US tourists.
    2. Smaller national economies holding mucho US debt
    3. Small to mid sized home insurance companies in big sub-prime or foreclosure markets
    4. Mid market furniture stores

  136. njrebear says:

    Sen. Schumer presses Bush on housing amid financial fallout

  137. skep-tic says:

    “There just aren’t enough people who make enough money to support that many $800,000 homes.”

    Many homesellers are still confused on this point.

  138. Stu says:

    Nouriel Roubini’s Global EconoMonitor
    A Generalized Run on the Shadow Financial System
    Nouriel Roubini | Mar 17, 2008

    Since the onset of the liquidity and credit crunch last summer this column has been arguing that monetary policy would be impotent to address such a crunch because, in part, of the existence of a non-bank “shadow financial system”. This system is composed of conduits, SIVs, investment banks/broker dealers, money market funds, hedge funds and other non bank financial institutions.

    All these institutions look similar to banks because they are highly leveraged and borrow short and in liquid ways and invest or lend long and in illiquid ways. This shadow financial system is, like banks, subject not only to credit and market risk but also to rollover or liquidity risk, i.e. the risk deriving from having a large stock of short term liabilities (relative to liquid assets) that may not roll over if creditors decide to withdraw their credits to these institutions.

    Unlike banks this shadow financial system does not have access to the lender of last resort support of the central bank as these are not depository institutions regulated by the central banks. What we are now observing – with the case of Bear Stearns and the recent disaster among SIVs, conduits, run on a number of hedge funds and money market funds is a generalized liquidity run on this shadow financial system.

    The response of the Fed to this run has been radical and in the form of the extension of the lender of last resort support to non bank financial institutions. Specifically, the new $200 bn term facility allows primary dealers – many of which are non banks – to swap their toxic mortgage backed securities for US Treasuries; second, the Fed provided emergency support to Bear Stearns and following the purchase of Bear Stearns by JPMorgan, is now providing a $30 bn plus support to JPMorgan to help the rescue of Bear Stearns; finally, now the Fed is allowing primary dealers to access the Fed discount window at the same terms as banks.

    This is the most radical change and expansions of Fed powers and functions since the Great Depression: essentially the Fed now can lend unlimited amounts to non bank highly leveraged institutions that it does not regulate. The Fed is treating this run on the shadow financial system as a liquidity run but the Fed has no idea of whether such institutions are insolvent. As JPMorgan paid only about $200 million for Bear Stearns – and only after the Fed promised a $30 billlion loan – this was a clear case where this non bank financial institution was insolvent.

    The Fed has no idea of which other primary dealers may be insolvent as it does not supervise and regulate those primary dealers that are not banks. But it is treating this crisis – the most severe financial crisis in the US since the Great Depression – as if it was purely a liquidity crisis. By lending massive amounts to potentially insolvent institutions that it does not supervise or regulate and that may be insolvent the Fed is taking serious financial risks and seriously exacerbate moral hazard distortions. Here you have highly leveraged non bank financial institutions that made reckless investments and lending, had extremely poor risk management and altogether disregarded liquidity risks; some may be insolvent but now the Fed is providing them with a blank check for unlimited amounts. This is a most radical action and a signal of how severe the crisis of the banking system and non-bank shadow financial system is. This is the worst US financial crisis since the Great Depression and the Fed is treating it as if it was only a liquidity crisis. But this is not just a liquidity crisis; it is rather a credit and insolvency crisis. And it is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages.

  139. njpatient says:

    “Bear was a major promoter of the most questionable subprime lenders. It lured customers into two of its own hedge funds that were among the first to go bust in the current crisis. And it’s a bad financial citizen: the last time the Fed tried to contain a financial crisis, after the collapse of Long-Term Capital Management in 1998, Bear refused to participate in the rescue operation.

    Bear, in other words, deserved to be allowed to fail — both on the merits and to teach Wall Street not to expect someone else to clean up its messes.

    But the Fed rode to Bear’s rescue anyway, fearing that the collapse of a major investment bank would cause panic in the markets and wreak havoc with the wider economy. Fed officials knew that they were doing a bad thing, but believed that the alternative would be even worse.

    As Bear goes, so will go the rest of the financial system. And if history is any guide, the coming taxpayer-financed bailout will end up costing a lot of money.”

  140. njpatient says:


    here’s a pull quote from roubini;

    “This is the most radical change and expansions of Fed powers and functions since the Great Depression: essentially the Fed now can lend unlimited amounts to non bank highly leveraged institutions that it does not regulate.”

  141. John says:

    When will be capitulation?

    Morgan Stanley retreated $2.55, or 6.5 percent, to $37. Merrill Lynch & Co., the third-largest securities firm, dropped $1.59, or 3.7 percent, to $41.92. Washington Mutual Inc., the biggest U.S. savings and loan, fell $1.02, or 10 percent, to $9.57. Citigroup Inc., the biggest U.S. bank, declined 65 cents, or 3.3 percent, to $19.13.

  142. par4156 says:

    more drama…anyone?


  143. grim says:

    I call dibs on the book title:

    “When Genius Inhaled, the rise and fall of Jimmy Cayne and Bear Stearns”

  144. njpatient – emperor honorius

    An interesting thought. Indeed, is this how it ends? Also, is China the logical successor or is it the Euro-zone?

  145. grim says:

    Or maybe:

    “When genius bailed…”

    Would be more appropriate.

  146. John says:

    BTW when you throw this month’s account statement in the sock drawer to be reviewed in 2009 hedge your bets by throwing in a loaded revolver.

  147. njpatient says:

    149 grim

    You know where the author if “When Genius Failed” is from????

    You’ll NEVER guess!!!!!!!

    You’re RIGHT!!!!!!


  148. Stu says:


    I was thinking that same thought when I went to sleep last night.

    Why is the FED bailing out a business it does not regulate or even understand?

    The only thing I can think is that things are much, much worse than anyone is willing to admit.

    Looks like the 800-pound gorilla, derivatives, is starting to surface.

    So when those monstrous bonuses were announced this past Xmas, were we to believe that those behind the walls of these investment firms were not aware of the precarious positions of their businesses?

    As usual, the rich get richer and the middle class gets screwed.

  149. njpatient says:

    148 tosh
    I’d give the Euros a short regency in keeping the throne warm for China.

  150. njpatient says:

    “The only thing I can think is that things are much, much worse than anyone is willing to admit.”


  151. njpatient says:

    “skep-tic Says:
    March 17th, 2008 at 11:35 am
    “There just aren’t enough people who make enough money to support that many $800,000 homes.”

    Many homesellers are still confused on this point.”

    So are many policymakers.

  152. grim says:

    We’re living through what is destined to become a required MBA course. Well, I can only hope. Does this at least warrant a footnote in history?

  153. Stu says:

    China isn’t gonna come out of this unscathed. They are not self sufficient and need exports to fuel their growth. As the dollar collapses, so does their export business. I do believe this is Bergabe’s plan.

  154. skep-tic says:

    Problem? (from today’s “Ahead of the Tape” in the WSJ):

    “All of the brokerage houses are highly leveraged, with a high ratio of assets to shareholders’ equity, a sign they have used debt heavily to build up positions in hope of greater returns. Morgan Stanley, which will report Wednesday, had a leverage ratio of 32.6-to-1 at the end of last year, nearly as high as Bear’s 32.8-to-1. Lehman was leveraged 30.7-to-1, and Merrill Lynch 27.8-to-1. And the would-be rock, Goldman? It was leveraged 26.2-to-1.”

  155. njpatient says:

    157 skep

    It’s not just the brokerage houses, either….

  156. njpatient says:

    156 grim
    In a history of finance text, I think this’ll wind up with a chapter.

  157. Stu says:

    Defining 800-pound gorilla.

    Subprime estimate to cost 400-600 million (conservative) to 2 trillion (Roubini).

    Compare this to the number of derivatives on the books at the five following US banks

    JPM $7,778.3

    BofA 1,575.3

    Citi 3,037.1

    Wachovia 401.3

    HSBC 1,139.5

    TOTAL $13,931.5

    And by the way, these numbers are in $billions.

    30 billion here, 2 trillion there, another 14 trillion over there.

    US GDP is only about 13 trillion.

    I read somewhere that Lehman is leveraged 41 to 1 vs. BSC’s 30 to 1.

    Good times!

  158. Sean says:

    Here comes the sell off, all RED except for Gold.


  159. grim says:

    From Bloomberg:

    Stock Market Veterans Granville, Stovall Predict More Losses

    Joseph Granville and Robert Stovall, octogenarians who’ve seen every financial market downturn since the 1950s, say the current one may be the worst and is far from over.

    Granville, born in 1923, remembers his banker father’s bad moods following the stock-market crash of 1929. The younger Granville began his career at defunct brokerage E.F. Hutton in 1957, quit in 1963 to begin publishing a weekly newsletter and wrote nine books on investing.

    “We’re in a crash,” Granville, 84, said in a telephone interview from Kansas City, Missouri, where he lives and works. “This is the worst I’ve seen, and I’ve studied every bit of history all my life.”

  160. Rob says:

    Stu, that is my theory. If Bear failed suddenly, all of its derivative counterparties are left in the lurch and who knows what that might do, even temporarily, to their cash position.

  161. Stu says:


    When Lehman falls next (and all it will take is a rumour), it could spell a run on investment banks. The run on Bear might have just been the beginning.

  162. grim says:


    From Bloomberg:

    Goldman Sachs Says Abby Cohen to Stop Making S&P 500 Forecasts

    Abby Joseph Cohen, the most bullish investment strategist on Wall Street this year, will stop making Standard & Poor’s 500 Index forecasts for Goldman Sachs Group Inc.

    She was succeeded in the role by David Kostin, Goldman’s U.S. investment strategist

    Cohen, as chief investment strategist, last predicted the benchmark for American equities would end 2008 at 1,675, representing a 32 percent rally from its current level.

  163. grim says:

    What is going on with MF Global?

  164. chicagofinance says:

    njpatient Says:
    March 17th, 2008 at 12:02 pm
    156 grim
    In a history of finance text, I think this’ll wind up with a chapter.


  165. Stu says:

    Bloomberg reports MF fell as much as 80% on speculation clients are pulling money and as financial shares dropped to their lowest level in 5 years. “There are concerns that their commodities prime brokerage group customers are pulling out. The customers have concerns about the financial stability of the firm.”

  166. njpatient says:

    167 chi
    we’ll see

  167. Stu says:


    Better call Morgan before they close down ;)

  168. grim says:

    I’ll say that LTCM got about 15 minutes worth of lecture in my Economic and Fiscal Policy course.

  169. House Hunter says:

    After Bear Stearns, Is Lehman Next?
    An Asian Bank Warns Traders Not to Do Business With Lehman Brothers


  170. Clotpoll says:

    grim (156)-

    When this is all said and done, it won’t be a footnote…it’ll be an entire chapter.

  171. njpatient says:

    “Clotpoll Says:
    March 17th, 2008 at 12:19 pm
    grim (156)-

    When this is all said and done, it won’t be a footnote…it’ll be an entire chapter.”


    (just saving chifi some time….)

  172. grim says:


    Can you give me a read on the mortgage situation this morning?

  173. Shore Guy says:

    “President Bush assured the world that the United States was “on top of the situation” in financial markets….”


    Is there anyone else who finds such statements from Bush a little less than comforting? It is not like the administration has a great track record of managerial success.

  174. Victorian says:

    LEH down 40%. Out of adjectives.

  175. kettle1 says:


    This is my response to bushes statement.

    http://tinyurl.com/24gyf9 (SFW)

  176. hughesrep says:

    Shore Guy-

    “on top of the situation”

    He meant he was in the missionary position as he was screwing you.

  177. Sean says:

    Staff turning up for work at Bear Stearns’ Manhattan headquarters were welcomed by a two-dollar bill stuck to the revolving doors.

    I wonder if they have any windows that open in that building?

  178. Jill says:

    chicagofinance #118: Understood, of course. But hoo-boy, is this scary.

  179. SG says:

    So when those monstrous bonuses were announced this past Xmas, were we to believe that those behind the walls of these investment firms were not aware of the precarious positions of their businesses?

    Stu – Do you think the whole financial crisis is staged event?

  180. SG says:

    To add to my previous note,

    After all staging is very critical to Real Estate business. Bringing financial crisis at beginning of RE selling season, would definitely make Agents job easier to ask seller to reduce price. What a timing !!!

  181. njpatient says:

    FEMA is forming a search party to try to find half of LEH’s market cap.

  182. Aaron says:

    The sad thing is Bernake could have forced them to mark to market last August. The markets would have (rightfully) tanked and a bunch of banks go under. The financial markets would have started healing by now and we would be looking to the future.
    These stick saves are killing us.

  183. grim says:

    From MarketWatch:

    U.S. home builders’ index steady at 20 in March

    U.S. home builders remain discouraged about their industry, but their attitudes didn’t get any worse in March, according to the monthly sentiment index released Monday by their trade group. The National Association of Home Builders/Wells Fargo housing market index remained at 20 in March as expected, close to the all-time low of 18 reached in December. The index shows that only about one-in-five home builders has a positive view of the industry. Sentiment among builders has been nearly unchanged for the past seven months at a very low level.

  184. njpatient says:

    I think Stu’s point was that the guys at the helm knew the boat was headed directly for an iceberg, but they didn’t blow the horn or put the engines full astern because they didn’t want folks to get alarmed before the bonuses got paid.

    Remember the bonuses?

    Pretorius has a link somewhere….

  185. njpatient says:

    “U.S. home builders remain discouraged about their industry, but their attitudes didn’t get any worse in March, according to the monthly sentiment index ”

    How are things?

    10%: “Good”
    30%: “Fair”
    20%: “Poor”
    40%: “At least we’re not in banking”

  186. x-underwriter says:

    Shore Guy Says:
    March 17th, 2008 at 12:27 pm
    “President Bush assured the world that the United States was “on top of the situation” in financial markets….”

    That reminds me of the scene in the movie Dr. Strangelove where Slim Pickens rides the atom bomb out of the belly of the B-52.

  187. SG says:

    njpatient: I understand.

    Basic Question on Mark to Market.

    What is it and how it’s done? Is it that all homes with mortgage are appraised to their current value at regular interval and balance sheets are updated with current value of asset and liability. If yes, how often do they do it? Also, how close these values are compared to what is available on free sites such as Zillow?

    I know that there are few companies who appraise home values using computer models (In fact my friend used to work at one of them in Canada.) I can imagine that Bank using such services to find current values of homes that they are servicing.

  188. BB says:

    Checked out the Morris County Sheriff’s Sale today and found this little beauty in my town.

    74 Madison

    Bought 4/06…morgaged $670,000(looks like 100% financing, adjustable rate, Fremont)
    Judgement(Fremont) $807,935

  189. Kevin says:


    The Fed is allowing non-bank institutions to borrow funds. If those institutions have those funds taken by investors closing out their positions, and if those institutions then go belly up, will the Fed have to borrow the money to cover them, or will the Treasury simply deem those funds into existance and hand them to the Fed?

    In essence, do my children and grandchildren have to pay for it, or do we pay for it through inflation?

  190. par4156 says:

    I thought that smaller home insurance companies would be one of the next “victims” in this debacle, but what about the small banks that loaned money to regional or local builders? Does anyone know what kind of controls are in place to manage the risk of failed projects? It seems that some of the smaller banks have also been rewarding smaller, shorter, term fixed deposits with higher returns recently. They must have been reaping rewards from riskier investments similar to the big boys. When will their chickens come home to roost?

    apologies for the possible re-post…

    Also, what about towns that built high end housing projects during the boom and can’t populate them. Does that bond debt get weighted more heavily toward local taxes?

    There was an article in one of the weekend papers that talked a bit about this, but I don’t recall them saying what the underwater towns would or could do to handle the situation. Does anyone have expertise or some knowledge in this area?

  191. John says:

    All the banks collasping were robbed by the zero down subprime crowd. They should line them up and shoot them.

  192. mr potter says:

    Met with a reputable builder over the weekend who shared with me that they can not get loans since the banks are now requiring documentation. How dare they !!!

  193. Richie says:


    Where do you live? I’m right on Jacksonville. I’ve seen lots of houses sell for $600k plus in 2005-2006, I’m wondering how many are going to end up the same way as this one.

    Checked out the Morris County Sheriff’s Sale today and found this little beauty in my town.

    74 Madison

    Bought 4/06…morgaged $670,000(looks like 100% financing, adjustable rate, Fremont)
    Judgement(Fremont) $807,935

  194. tim says:

    Obama Attended Hate America Sermon
    Sunday, March 16, 2008 7:14 PM
    By: Ronald Kessler
    Contrary to Senator Barack Obamas claim that he never heard his pastor Jeremiah A. Wright, Jr. preach hatred of America, Obama was in the pews last July 22 when the minister blamed the white arrogance of Americas Caucasian majority for the worlds suffering, especially the oppression of blacks…..Obama claimed, The statements that Rev. Wright made that are the cause of this controversy were not statements I personally heard him preach while I sat in the pews of Trinity [United Church of Christ] or heard him utter in private conversation. In fact, Obama was present in the South Side Chicago church on July 22 last year when Jim Davis, a freelance correspondent for Newsmax, attended services along with Obama. In his sermon that day, Wright tore into America, referring to the United States of White America and lacing his sermon with expletives as Obama listened. Hearing Wrights attacks on his own country, Obama had the opportunity to walk out, but Davis said the senator sat in his pew and nodded in agreement. Addressing the Iraq war, Wright thundered, Young African-American men were dying for nothing. The illegal war, he shouted, was based on Bushs lies and is being fought for oil money. ..…) 2008 Newsmax. All rights reserved.

  195. tim says:

    sorry i know its not realestate but since I found out about this I had to share and I have been a member of this blog since 2004

  196. Richie says:


    Not only have they not paid their mortgage payments, they also stopped paying their taxes.. Pequannock issued a tax sale on their property this past November..


  197. ricky_nu says:

    JPM to lay off 50% of BSC folks, that 7k unemployed…..

    not so good to be in finance these days

  198. John says:

    Where did you hear that?

    ricky_nu Says:
    March 17th, 2008 at 1:35 pm
    JPM to lay off 50% of BSC folks, that 7k unemployed…..

    not so good to be in finance these days

  199. Clotpoll says:


    Here’s today’s latest on mortgage pricing:

    1. The aggressive lenders (mid-size, non-money center, non-toxic, like Flagstar): 40 to 50 bps better, across the board. That puts a 30 fixed, 700+ FICO back under 6%…possibly as low as 5.75%.

    2. The shaky lenders: prices same as last week. No changes. That equals 30 fixed at 6.25% or over.

    The mortgage market seems to be clearly breaking into two camps. Those that won’t reprice are essentially out of the game now.

  200. kettle1 says:

    Debt Reckoning: U.S. Receives a Margin Call (WSJ)

    The U.S. is at the receiving end of a massive margin call: Across the economy, wary lenders are demanding that borrowers put up more collateral or sell assets to reduce debts.

    The unfolding financial crisis — one that began with bad bets on securities backed by subprime mortgages, then sparked a tightening of credit between big banks — appears to be broadening further. For years, the U.S. economy has been borrowing from cash-rich lenders from Asia to the Middle East. American firms and households have enjoyed readily available credit at easy terms, even for risky bets. No longer.

  201. par4156 says:

    I still say that a company can use a brand or reputation (e.g. Prudential, Sears or Walmart)to buy houses en masse (from a bank in areas with high default rates), do minor or aesthetic repairs and sell or rent long term at a profit. Maintenance could be offered as an option in the rent or be included (much like insurance or taxes) in the mortgage deduction by the bank…creating sustainable entry level jobs.

    Banks could unload their at risk or forclosed inventory along with all the risk at a slightly bigger discount. The federal government could then reduce any current or future bailout plans by “insuring” the investment by the private companies or putting up relitivly small amounts of capital for rehabing the buildings. Of course there would have to be limits on investment per building depanding on the location, but the cost to taxpayers would be low, short and long term employment created, and companies could potentially make money the old fashioned way.

  202. #204 – Dow Jones Newswire – I’ll see if I can find a link.

  203. skep-tic says:

    “All the banks collasping were robbed by the zero down subprime crowd.”


    I’ve got a way to pay for the bailout– audit anybody who walks away from their house/mortgage and then impose the maximum statutory fine for fraud on those who lied about their income/assets

  204. kettle1 says:


    While people who lied should be held accountable, what happened to banks doing due diligence???.

    There are few innocent parties here! I say bail out NO ONE! Cull the heard and we will come out the other side stronger for it

  205. njrebear says:

    JPMorgan Chase & Co.’s (JPM) takeover plans for Bear Stearns Cos. (BSC) include cutting more than half of Bear’s 14,000-member staff, CNBC’s Charlie Gasparino reported Monday, citing sources at JPMorgan.
    The layoffs are anticipated over the “next couple months,” Gasparino said.
    Gasparino added that expansions are planned for Bear’s trade-clearing, prime-brokerage and energy-trading businesses. He said JPMorgan will consider bringing in Bear people to bolster JPMorgan’s existing fixed-income and investment-banking operations.

  206. Confused In NJ says:

    Waterboarding is still allowed, and should be used on Alan Greenspan to uncover the truth about the Financial Treason which has ocurred. AG should roll over very quickly and implicate the rest of the Cabal.

  207. par4156 says:

    Skep – re:109. only problem is that it would cost more to do the audit than what you would get from the supposedly asset/cash poor defaulters. Gotta make a grab for the banks/brookers that fueled the game. You know those guys…the ones that said…”oh, we’ll correct that before the closing”

  208. njpatient says:

    “All the banks collasping were robbed by the zero down subprime crowd.”

    Not a whit of sympathy. Those banks thought they were robbing the zero down subprime crowd. Oops.

  209. skep-tic says:

    #213 “only problem is that it would cost more to do the audit than what you would get from the supposedly asset/cash poor defaulters”

    probably right– although you could garnish their wages going forward

    #210 “While people who lied should be held accountable, what happened to banks doing due diligence???.”

    banks are paying the price for this failure already. borrowers are making out like bandits

  210. JLB says:

    chicagofinance Says:
    March 17th, 2008 at 10:50 am
    Jill Says:
    March 17th, 2008 at 10:36 am
    For those of us who are not in the world of high finance but who have IRAs and 401(k) and related plans: Where should we be right now? I have an IRA with Morgan Stanley; should I pull it out and put it in a CD at Hudson City? I’m less concerned about TIAA-CREF, but what should those of us who can ill afford to lose everything we have do right now?

    Jill: #1 you are not my client; you do not compensate me; you cannot hold me liable for any advice I state here; you must call Morgan Stanley your service provider for advice.
    #2 throw your statement for March in the sock drawer when you get it in the mail – DO NOTHING – thank me later….as in 2009

    THIS IS THE VALUE IN THIS BLOG! Some quality advice!

  211. SG says:

    Did Mark-to-Market Accounting Create the Credit Bubble?

    The paper concludes it was inevitable that an industry buoyed by rising asset prices would pursue increasingly aggressive lending growth. This pushed credit upon ever more risky clients and loan structures, which then fed into asset price growth. This of course added more fuel to the fire – or created “positive feedback loops”.

    The most disturbing conclusion is that this system should behave in exactly the same way in reverse, creating “negative feedback loops” with a destructive impact on all kinds of asset values – from structured finance to house prices and equities.

    The lesson for regulators is that the solution to one problem almost always contains the seeds of another.

  212. njpatient says:

    “banks are paying the price for this failure already.”

    “banks” may be, but the executives already got their cash. Are you going to claw it back?

  213. kettle1 says:


    i would argue that the banks have not paid for their actions. The companies may have but the Robber barons running the banks and handing out the cash are off to their villa in Tahiti while this stuff hits the fan (i.e record bonus’s this past nov)

  214. BB says:


    I saw that too. I’m not familiar with that street, but looking at mapquest, it looks like it’s the in “flood zone”. I’m curious only because the lot looks like almost 2 acres.

  215. skep-tic says:

    “executives already got their cash. Are you going to claw it back?”

    depends on the terms of their employment agmts and the extent to which their compensation was made by breaking the law. my basic point is that people who broke the law should pay. I am confident that a string of executives will be prosecuted when all is said and done. But there are millions of borrowers who lied about their income who are getting nothing but tax breaks and checks from the gov’t right now

  216. skep-tic says:

    “i would argue that the banks have not paid for their actions. The companies may have but the Robber barons running the banks and handing out the cash are off to their villa in Tahiti while this stuff hits the fan”

    I agree w/r/t the top executives. The boards of directors of these institutions bear responsibility for continuing to approve these egregious executive comp agreements

  217. par4156 says:

    Dow…slippin’. remeber when a little airline bankruptcy was news?

  218. JLB says:

    the dollar may be propped in a concerted effort with and by our “friends” and we may see a ‘capitulation’ sooner than later. For those not getting it, it is not subprime at this point (although a catalyst) and Bear failed due to SENTIMENT!

  219. JLB says:

    Oh, and just in case some of you just got your green card, this is a capitalist thing…you too could be a highly compensated executive!

  220. par4156 says:

    takin’ way too long to submit after writing my posts. dow clawing back slowly now…still should be down today though. Nice excuse for heavy beer drinking after 4 pm.

  221. Jaw says:

    Clot @ 205,

    Do you mind telling us the names of some of the agressive lenders? It would be a good future reference when mortgage shopping. Thanks.

  222. SG says:

    Some more on Mark to Market.

    March Market-to-Market Madness

    Federal Reserve Chairman Ben S. Bernanke said in congressional testimony on Feb. 28 that accounting rules may be forcing banks to put artificially low values on little-traded assets when they mark them to market. The inability to value such assets on the basis of actual trades, Bernanke said, is “one of the major problems that we have in the current environment. I don’t know how to fix it. I don’t know what to do about it.”

    “You really don’t know the value of the asset, and if you undervalue it, you may be hurting things as much as if you overvalue it.”

    he said, adding, “This is really an accounting board responsibility.”

    Is all this mess largely due to Accounting standard? As I mentioned in the past, I have gotten home price appraisal from some of these computerised system. My feeling is in Boom time they overstated home values and on the same token now they may be understating values.

  223. par4156 says:

    #225. JLB, you could do so much more to convince people of your arguments if you could think as fast as you type. You spoil even your good points by overshawing them with blockheaded precursors.

    …and that’s coming from one of the least market astute people on this blog!

  224. par4156 says:


  225. bairen says:

    I wonder how many Bear employees who were millionaires when Bear was around $160 became thousandaires over the weekend?

    When I was working for a big bank/broker in NY I was shocked at how many people had all their 401k money in the company’s stock. Plus bought stock through payroll deductions and bragged it was the only thing they owned and that they were going to be able to retire in x number of years because of the stock’s growth history. I’ve heard similar comments from people at other shops as well.

    My former employer’s stock is down over 50% since 1999. Guess lots of people will have to work a lot longer then they planned. Of course on Wall St once you break 40 years old the clock starts ticking pretty loud.

  226. par4156 says:

    lady next door over told me her nephew (at bear stearns)had 30k in stock as part his bonus. All gone now…luckily he felt the vibe and already has a few interviews lined up.

  227. grim says:

    Can’t make this kind of stuff up…

    From Reuters:

    Gallows humor, realtor greet Bear’s stunned staff

    Shocked Bear Stearns (NYSE:BSC – News) employees trudged into work Monday morning desperately seeking clarity on their futures.

    The fact that the first person they met on entering their headquarters in midtown Manhattan was a salesman hawking cheaper apartments did little to lift their mood — an ironic twist, perhaps, given that it was risky speculation in the housing market that got the bank into trouble in the first place.

    “I’ve been at Bear for 11 years and I want to vomit,” said a Bear Stearns employee, who described himself as a partner, as he entered the striking seven-year-old octagonal building two blocks from Grand Central Terminal.

    To add insult to injury, someone had taped a $2 bill to the revolving glass doors at the 46th and Vanderbilt Avenue entrance — some gallows humor on the bargain-basement $2-a share price JPMorgan Chase (NYSE:JPM – News) paid for Bear Stearns.

    “Where is the $2 bill?” joked one employee, “I might need that tomorrow!”

    At the Madison Avenue entrance, Ray Schmitz, a Realtor with Coldwell Banker, was betting that with the value of their stock options in tatters, Bear’s employees might soon be looking to trade their luxury homes for something a little easier on the budget.

    “You have to go where the business is,” Schmitz said as he handed out business cards. “A lot of these people are going to lose their jobs, and most of their wealth will have been in share options. They’re soon going to be looking for a cheaper place to live.”

  228. JLB says:

    #229: eat around the bruises

  229. grim says:

    “You have to go where the business is,” Schmitz said as he handed out business cards. “A lot of these people are going to lose their jobs, and most of their wealth will have been in share options. They’re soon going to be looking for a cheaper place to live.”

    And Realtors have the nerve to say lowballers have no shame?

  230. par4156 says:

    DOW overvalued at least 10%?


    “This is a different kind of bear market,” Byron Wien, chief investment strategist at Pequot Capital Management Inc., a Westport, Connecticut-based hedge fund with $7 billion in assets. “This is serious and it isn’t over yet. There’s more to come because people are still too complacent.” The 75-year-old strategist, who expects U.S. stocks may fall 10 percent more, said the fund has a so-called net short position, or more wagers against stocks than bets that they will advance.

    Investors are skeptical of valuations because of the prospect of a stagnating economy, said Roland Lescure, chief investment officer at Groupama Asset Management in Paris. S&P 500 members are trading at 13.2 times forecast profit, data compiled by Bloomberg show. The last time the historic price-earnings ratio traded at that level was in 1989.

    Versus 10-year Treasury notes, U.S. stocks yielded 1.62 percentage points more in earnings in January, the widest advantage since at least 1986, according to Bloomberg data.

    “The market is cheaper, but is it cheap?” said Lescure, 41, who oversees $140 billion. “I am not so sure. There is more bad news to come.”

    DOW at 10,000 may not be so bad afterall!

  231. par4156 says:

    #234…niffty comeback.

  232. kettle1 says:

    similar story as par….

    I recently had a realtor bragging to me how a family friend got hired by…… BEAR, in late 06 and had bought a multi-million dollar property in NNJ from her, and how it was this type of person that would keep the market afloat.

    Oh and he is junior guy, mid to late twenties, we aren’t talking partner level here.

  233. HEHEHE says:

    Mark to Market is not the problem. The problem is that for too long it was Mark To Make Believe. These politicians complaining about this need to get their head examined.

  234. par4156 says:

    some of the younger/junior bank employees who are married or live with their partners have a dual income lifestyle. While it may seem crazy to some of us with more earthly incomes…these couples may struggle to pay their mortgages almost immediately. guess it’s all relative…Naples, FL or the French Riveria?

  235. John says:

    Crazy as this sounds my friend was open house hunting in Garden City Long Island on Saturday and the open houses were full and the houses were selling. We are talking multi million dollar homes. My friends c-level boyfriend lives in GC and is looking to trade up in GC. RE prices are kinda irrelevant I guess when you make in the ten figures each year.

  236. (Former) NJGal says:

    Hey all – haven’t been around in a while (on maternity leave) but it’s good to see you’re all here and I’m not surprised the predictions have come to fruition.

    The scary thing for me now is that my parents are trying to sell their home – they just put it on the market – in an upscale town on Long Island. They’ve actually had a lot of showings and the house isn’t even on the MLS, but no offers yet. It’s a great house (diamond condition), great location – probably as good a position as one would want to be in in this kind of market, but no takers yet. And now with all the financial news, it’s getting me worried, as I was the one pushing them to sell 2 years ago. They weren’t ready, so what can you do? I’m not going to say I told you so to my parents.

    Seeing this from the sellers’ perspective is interesting to me, since I’d been a “buyer” for so many years. My mom just bought a St. Joseph’s statue – I just shut my mouth, because if it makes her feel better, so be it. But I am worried for them, since they’ve already gotten the new place (in another state). Now, they bought over 30 years ago, so they are real equity people, but still – dad is sick and going to have to go on disability. They can’t stay in NY.

    We’re still faring well in our new place – very happy with our decision, or at least, I am. My husband, when reading the papers, keeps saying, “I made you buy this house too soon!” But, you can’t live with regrets I tell him, and since we’re in it for the long haul and bought a place we could stay in for 30 years, I think we’ll be fine. Hopefully when we’ve saved some more money, in 10 years or so we might want to look for a bigger place. But right now I’m content (and happy as hell to be out of Hoboken, I can say that much!)

  237. mr potter says:

    Jamie Dimon knows lowball

    His bid was $11 and went to $2 when the competition went away…………

  238. jmacdaddio says:

    A question for the realtors on here (Clot, Grim): what is a back up offer? I got a note from Ms. Zipper (who tried the phantom buyer trick on me a month ago) telling me that an offer is in on the townhouse after lowering the price and that she is accepting only back up offers.

  239. John says:

    Hey Former, NJGal what town is the home on LI? My friends in GC and RVC have told me homes are still moving. I have been occassionally been looking in Manhasset and Latington and the prices there have not fallen much at all, much to my dismay.

  240. John says:

    Mr. Dimon is Greek and knows how to wheel and deal.

    I heard Bear is taking metrocards in its new stock purchase plan!!!

  241. IVV says:

    How much would it cost to get a bunch of kids on bikes to run around Wall Street shouting, “Two dollars! I want my two dollars!”

  242. Jill says:

    tim #200: Sorry, dude, but Kristol has already had to retract his claim that Obama was in the pews that day .

    Try fact-checking next time.

  243. (Former) NJGal says:

    John – RVC. Yeah, it seems places are moving, albeit slowly. In fact, a really ridiculously priced house – 2 in fact, now that I think of it – just sold, over $2 million. But they’re homes that living where I live now (Bedford) make me look in shame on Long Island, because what you can get there for 2 million versus where I am? I will never move back to Long Island. The $2 million place was really wholly unimpressive to say the least. A nice house, but NOT worth that much. Hopefully though my parents will be able to sell it. They’ve really taken care of it and on my suggestion updated it a lot these past few years – no more carpeting or wall paper or anything.

    I actually know people looking to move to Garden City. I suppose if you’re a finance guy and haven’t been too crazy in your spending, or if you have equity from buying a while ago, living in those two towns is actually a bargain in comparison to the North Shore.

    I haven’t seen so many prices dropping, but it does seem to me that the homes on the lower end – those that would have been asking 600K or so, are now in the 500 range. But other than those few places, I think you’re right about prices being about the same.

  244. Aaron says:

    The problem is they marked-to-market the things that put them in a favorable light and hid those that didn’t.

    Ken Lay would be proud.

  245. HEHEHE says:

    “My mom just bought a St. Joseph’s statue”

    They are selling those in the Hoboken hardware stores. You can get some good one’s online that add the additional selling powers of Saint Jude or Baby Jesus.

  246. skep-tic says:

    I take it a step further and just wear a baby jesus around my neck like a medallion. No point in half-@ssing your magic talismans

  247. rhymingrealtor says:

    Welcome Back NJGAL!!!

    I’ve asked about you so many times! I even asked jb in private email if he’d heard from you. How bout some details on the little one? Are you back to work yet? My SIL was due at same time as you, my niece is beautiful! Congrats!!!


  248. (Former) NJGal says:

    I know, it’s ridiculous. She got it because my mother in law swears it helped her sell HER house. My poor mother, on her knees burying a statue. But like I said, if it gives her hope, who am I to say anything?

  249. (Former) NJGal says:

    Hey KL! Thanks! I just got back to work – I had a nice long leave (thanks to a very nice boss, it was long AND fully paid, and I had time off before). Work feels good. I miss my little precious, but what can you do?

    The baby is great – I had an emergency c-section but other than that, she’s absolutely perfect and beautiful. She was 7 lbs, 11 oz and is almost 15 lbs now and about 26 inches tall. She’s doing really well otherwise – “talking,” trying to crawl, rolling over, making raspberries at us, eating solid food – all very exciting stuff, right? And she’s getting into a nice habit of sleeping 8 hours straight at night, which is nice for me. She seems to add a little more on each night, so hopefully we’ll have a 12 hour baby by 6 months. Plus, she looks like a little porcelain doll. Who knew you could love something so much? She makes all the crappy world news just disappear!

  250. John says:

    NJ Gal, the crazy thing is the cheap nieghborhoods like Freeport, Island Park and Levitown that at best hit 550K in the bubble are the ones dropping like a brick and the tony north shore and GC/RVC homes are just like 5% off peak which is peanuts after a 5 year 100% run-up. That is why the rich get richer I guess.

    In the good neighborhoods of LI to this day there are NO homes in good condition on a good street under a million, or for that matter even under 1.1 million.

    All the foreclosures seem to be in Roosvelt, Hempstead, valley stream and the north of sunrise section of Freeport. Free handgun included with every REO purchased.

  251. Sybarite says:


    That’s sweet.

  252. Sybarite says:

    Dow up 119!

  253. (Former) NJGal says:

    “Free handgun included with every REO purchased.”

    Ha! I remember passing numerous crack houses in Hempstead when I was younger. It’s a shame, knowing that it was one of America’s best towns once, according to Life magazine. As for Freeport, that’s another shame – there are some truly beautiful old Victorians there. If you do private school I suppose it’s fine, but not the public school.

    I hate to say what certain other people have said on this board, but there probably ARE going to be towns that aren’t hit as hard. I won’t say they’re immune because that’s stupid, but if a town is nice, has nice homes, easy access to shopping, a good commute and a good school system I suppose it won’t be hit quite as hard as others. I know RVC, for example, has more of a mix of people – it’s not just finance folk, but lots of cops, firemen, lawyers, etc. Plus it’s a very “townie” place where families stay for generations. So maybe it won’t fare as badly as some. But who knows. I’ll keep everyone updated on the selling process.

  254. Sassy says:

    Congrats (former) NJ Gal! Welcome back, missed your posts! Glad to hear you’re happy in No We.

    Don’t get too used to the idea of 12 hours by 6 months – those little teeth start showing up and they’re really bad for a good nights sleep. But, Metro North is great for a good long nap – coming and going!

    Hope you can share your observations on the No We Market!

  255. SteveTheBrigadoonian says:

    I think Westfield might do ok…

  256. Imus says:

    The Fed did a fine job shoring up this crisis. But no doubt the media/academics will keep doing their best to spur on a “crash”. Comedy.

  257. John says:

    Former) NJGal Says:

    If the house in RVC is a 4 bedroom on a good street I may be interested. It is my back-up neighborhood. It has a good train line, nice downtown, good schools, nice active church, near the beach and OMG close to Trader Joes in Oceanside. Why RVC can’t get it’s own trader Joe is beyond me, even bayside is getting one next month. What street and what price and what taxes? Taxes can be high in RVC as the cops spend all night in the projects by lakeview on OT. The realtors in RVC are vultures, half of them merged in the last year with the vulture like Daniel Gail who wants to make it a monoply so they can suck their full commission in a weak market.

  258. stu says:


    I was thinking the same thing. FED does the damage control through lies and deception as the media/academics preach the truth. All the meanwhile, the market slowly moves lower and lower. Perhaps it will be a ‘soft landing’ after all. I just hope the base elevation is a bit above sea level.

  259. (Former) NJGal says:

    Thanks Sassy – and yes, I think she’s starting. She drools and bites things really hard. I had my first tooth at 4 months so I suspect she’ll have one soon.

    According to my friend who’s a real estate agent, Northern Westchester is still selling, but it’s slow. My neighbors have their house for sale and I have not seen any activity. It’s dated and the land orientation isn’t great (on a high hill, huge driveway = crappy for snowy weather, plus no yard). So I’ll see what happens with that. My friend also said prices haven’t come down much. I told her what I paid and she said it would still be the asking price. I have noticed, however, that as you get up to Putnam prices are dropping – we just had friends lowball a brand new house and the offer was accepted (they cancelled b/c of other issues). I assume that’s because the commute up there isn’t great – the whole exurb phenomenon. Maybe it will trickle down, maybe not. I’ll keep prodding her for information.

  260. Sassy says:

    Thanks! I heard Putnam / Rockland was at a complete standstill traffic wise, and prices were heading south. GL to you!

  261. (Former) NJGal says:

    John, it’s a 4 bedroom, 2.5 bath, about 4000 sq. ft., 2 car garage, nice backyard, huge den (enormous, actually), a partially finished basement, perfect kitchen (really gorgeous – all custom mahogany cabinets, granite, stainless steel, eat in area, etc.) – a pretty typical colonial. They’re asking over 1.5 million (sadly I don’t know the exact numbers) and I think the taxes are around 18K. If you’re interested email Grim. Do you have an agent or would you come without? They were selling without an agent but now they’re with one, so I don’t know how that would work.

  262. njpatient says:

    221 skep

    “depends on the terms of their employment agmts.”

    Under the terms of their employment agreements, we will not be clawing it back.

  263. Clotpoll says:

    jaw (227)-

    This is a very fluid situation. Rather than naming names, I’d suggest two things:

    1. Use a good mortgage broker. This is an environment in which a good broker can “shop” your loan, and pit multiple lenders against each other.

    2. Unless it’s Hudson City- and you have a big DP and pristine credit- avoid going directly to a bank (especially a big one). They will bend you over.

    Caveat: tomorrow, everything could be entirely different. What I say is good for today may not be so tomorrow, or next week.

  264. Clotpoll says:

    As I finish post #271, the mortgage guys in the office cheer.

    Wachovia drops mortgage pricing 50 bps, across the board. The timing reeks of trying to get the drop on tomorrow’s action.

    Methinks the Fed may go 100 bps, with some sort of extraordinary announcement, to boot.

    More repricings coming through. This is a very odd time of day to be getting them…

  265. Clotpoll says:

    mac (244)-

    That property is marked in attorney review.

    That 12K price drop sold it.

  266. Clotpoll says:

    A backup offer is just that…it’s put in on the chance that the accepted offer might fall through.

  267. lisoosh says:


    We (KL and I) were wondering about you!

    How’s life? What did you have? Still out or back at work? Enjoying parenthood? And most importantly – what type of stroller did you end up with! ;-)

  268. Clotpoll says:

    grim (235)-

    Talk about working the bereavement market!

    That’s like Robin Williams in Cadillac Man.

  269. Clotpoll says:

    Imus (264)-

    Thanks for your report from the world of stupid.

  270. Clotpoll says:

    Gal (261)-

    When I lived down South, banks would regularly give away firearms when you opened an account.

  271. par4156 says:

    “Dow up 119!”

    …finished what…up 21. boy was I wrong on that one! I’ll just have to be patient i guess.

  272. lisoosh says:

    Ooops. KL beat me to it.

  273. Steve says:

    Word is clients are continuing to pull money out of Bear en masse, JPM or no. Apparently JPM said accept our deal (gun to head), or we’ll pull your Fed funding.

    Bear frantically trying to get a better deal done w/ other parties, seems to be confirmed by the fact BSC was trading $4-5 throughout the day.

  274. John says:

    Sounds nice, do you know the agent’s website, it does not appear to be on MLS?. I want to see the pictures. Using an agent to view another agents property is a good way to throw money down the drain so I don’t have an agent. Sometimes the listing agent will let you sell on your own, sometimes not depends on the contract and sometimes at a reduced commission.

    NJGal Says:
    March 17th, 2008 at 3:59 pm
    John, it’s a 4 bedroom, 2.5 bath, about 4000 sq. ft., 2 car garage, nice backyard, huge den (enormous, actually), a partially finished basement, perfect kitchen (really gorgeous – all custom mahogany cabinets, granite, stainless steel, eat in area, etc.) – a pretty typical colonial. They’re asking over 1.5 million (sadly I don’t know the exact numbers) and I think the taxes are around 18K. If you’re interested email Grim. Do you have an agent or would you come without? They were selling without an agent but now they’re with one, so I don’t know how that would work.

  275. Rich In NNJ says:

    185 here, 7,000 there, 8,000 there, 150 over here…

    From MarketWatch:

    Citi to cut 185 jobs in home mortgage division: report

    Citigroup Inc. will lay off 185 employees in its home mortgage division, the Associated Press reported Monday, citing a CitiMortgage spokesman. The layoffs were triggered by difficulties in selling home equity products, according to the news agency. However, the company is not exiting the home equity business but will focus more on supporting existing Citibank, corporate and Smith Barney customers.

  276. Hehehe says:

    Greenspan sees many casualties from crisis: report


    I am willing to wager no casualty will be as great as his reputations

  277. scribe says:


    There’s a British investor named Lewis, who owns 10% of Bear, and he’s saying “no way” to $2 a share:


  278. scribe says:

    In this Bear saga, I feel that there’s a missing link somewhere. What was the final straw that broke the camel’s back?

    I found a story on Mish’s blog that referenced a story in the Times Online UK that said:

    Banking sources speculated that Bear Stearns could have been hit by last night’s collapse in value of so called alt-A, or low-end prime mortgage securities.

    These are mortgages that are granted to borrowers with some past credit problems or who do not have all the correct documentation to gain approval for a home loan.

    “The Alt-A market fell out of bed last night and Bear would have been completely caned by this. They hold a bunch of these securities,” one investment banking source told Times Online.

    “Against what you might normally expect, the sub-prime market rallied, but alt-A sold off.”

    He added that Bear Stearns probably faced steep margin calls from its bank lenders as a result of the fall in value of its mortgage debt securities.

    But how does the Alt-A market “fall out of bed” … the derivatives tanked?

    Here’s the link to Mish’s blog:


  279. Secondary Market says:

    Here’s a nice little video for those of you that listen to Jim Cramer:


  280. Jaw says:

    Clot (271),

    Thanks for the advice. I was planning on doing exactly what you advised against, now I know better.

  281. Hehehe says:

    Re 287:

    The Najarians both commented on that on Fast Money. If I remember correctly the same thing happened prior to the BAC/CFC deal.

    A CYNICAL PERSON might think thats essentially the FEDS/PPT’s playbook is find the institution in trouble, find a white knight, allow the white knight insiders to get their put action and pocket some large personal profits as part of the merger deal, and promise the SEC won’t lift a finger.

    There’s major market manipulation going on right now.

  282. njpatient says:

    278 Clot
    “When I lived down South, banks would regularly give away firearms when you opened an account.”
    It’s only polite. You make a deposit, and they give you what you need to effectuate a withdrawal.

  283. Essex says:

    288….I now would like him to ‘go away’….

  284. bi says:

    funny thing is todays biggest loser is not financials, not techs. instead it is energy sector

  285. Kid Twist says:

    I love Germantown and the whole area. We get down there every 3 yrs or so. Beale street is great. Wish I was eating some ribs at the Blues city cafe! The wife and I got wasted once at Silky O’sullivans.

  286. kettle1 says:

    America was conned – who will pay?The Guardian, UK

    Ultimately, though, action will be taken because there will be political pressure for it. Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.

  287. Clotpoll says:

    Kid (295)-

    My first job was tending bar for Silky at the old Silky’s on Madison Av (back when you could be a bartender at 18 y/o). That guy gave me an MBA-quality education in life skills. He also taught me how to drink like a man and not act a fool.

    Silky was also an on/off Memphis city councilman and is your classic Southern Renaissance man…wrapped in the veneer of an aw-shucks, party-boy Bubba.

  288. kettle1 says:

    memphis is a dying city. the graft and racial strife compounded by a lackluster economy have put memphis on the path to the next detroit.

    disclaimer, i visit the city once a year whether i like it or not

  289. kettle1 says:

    Whistleblower exposes insider trading program at JP Morgan….


  290. kettle1 says:


    Monday March 17, 2008

    A confidential memo obtained by Wikileaks shows that not only has the U.S. Securities and Exchange Commission created an insider trading loophole big enough to drive a truck through, but that Wall Street is taking full advantage of it, establishing ‘how-to’ programs and even client service divisions to help well-heeled clients circumvent insider trading regulations.

  291. kettle1 says:

    link to JP morgan leaked memo (pdf)


  292. Steve says:


    Just fyi, these vehicles have been around for a long time…prepaid variable forwards are pretty common at most private banks (certainly saw these being done as early as 99-2000 w/ all the dot.com mania)

    Around the same time, there was a small group related to our firm, located in a satellite office doing huge business- taking private jets everywhere ridiculous perks. No one could ever figure out what these 5-6 guys did that made so much money. All we knew, they were called “Strategic Trading” —

    Turned out, they had this wonderful (!)solution to get around insider trading laws. They’d just take in senior execs restricted stock, have them sign it over to the bank, sell it and give them the proceeds. I sh-t you not.

    When the regulators figured this out, they went ballistic- and very nearly shut down the entire bank because of it. Of course they were doing a huge business, exec names everyone would know. Unreal.

    I particularly liked the Bankers who decided to help clients get around AML laws, telling them to just withdraw $9,999 to avoid the money laundering $10k reporting trigger. OCC loved that one. This was all pre-9/11, probably the only reason they didn’t all go to jail.

  293. (Former) NJGal says:

    Hey John, it’s Roxbury.

    And Lisoosh, I got the bugaboo chameleon. I didn’t buy it though. My mom thinks it’s the greatest thing in the world and bought it for me. I have to say, it is pretty good – we don’t have sidewalks by me and the tires have been good on the rougher streets. Plus once you get the hang of it it folds easily. And since we have plenty of room now, size is irrelevant anyway. I got a red one – that way I can keep it through the next kid and if it’s a boy the red will work.

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