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Deja Vu all over again?

Discussion in 'Uncategorized Threads' started by deckart, Mar 14, 2008.

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  1. deckart

    deckart TS Member

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    Just saw that the Federal Gov. aka us taxpayers, is bailing out the investment bank of Bears Stearns. What next?? bush says we can't help out the homeowners who face losing their homes but can turn around and help the WEALTHY investment bankers of Wall Street. I would like to hear why this is OK with you.

    This is the deja vu part. I had a flashback to the mid 80's. Repub president, tax cuts along with huge, amounts of deficit spending AND the savings and loan scandal. See below article.


    "" The US Savings and Loan crisis of the 1980s and 1990s was the failure of several savings and loan associations in the United States. More than 1,000 savings and loan institutions (S&Ls) failed in "the largest and costliest venture in public misfeasance, malfeasance and larceny of all time."[1] The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government -- that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts-- [2], which contributed to the large budget deficits of the early 1990s. The resulting taxpayer bailout ended up being even larger than it would have been because moral hazard and adverse-selection incentives compounded the system’s losses. [3]

    A taxpayer-funded government bailout related to mortgages during the S&L crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher-risk loans during the 2007 subprime mortgage financial crisis. ""
     
  2. J.Woolsey

    J.Woolsey Member

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    You have a little spin on this one don't you. J.P.Morgan loaned Bear an undisclosed amount for a period of 28 days, INSURED by The Fed. Seems that they are just buying time to make a permenant solution, Popular belief on Wall St. is that J.P.Morgan will purchase Bear. See the above read in the Denver Post. Taxpayers haven't put anything out on this one so far. J.Woolsey
     
  3. grnberetcj

    grnberetcj Active Member

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    Fox News on their Business section has it the way Woolsey described. Keep looking for a J.P. Morgan assest acquisition.

    Curt
     
  4. b12

    b12 Well-Known Member

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    In reality Bear Sterns is the Fed. Reserve along with several other wealthy families. However the buyout will keep several people out of prison and problably gaurantee the investors their money. Bill
     
  5. halfmile

    halfmile Well-Known Member

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    Nobles don't go to prison unless they dirty themselves, and even then rarely.

    Ted Kennedy is living proof of that.

    Bill, good shot. Most people think because of the use of the word "Federal" that somehow the government is controlling the money.

    In retrospect, it's a good thing they don't. We are a lot better off with the fox guarding the henhouse............aren't we?

    HM
     
  6. pendennis

    pendennis Well-Known Member

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    Deckart - The S&L crisis of the 1980's was fomented long before then. It started out in the 1970's, when Jimmy Carter and Congress, deregulated the S&L industry, allowing them to branch out from home mortgages and home improvement loans, to more speculative ventures in land development. Most of these S&L's were ill-equipped to deal with the complexity of holding companies, LLC's, etc.

    The S&L's got into some very speculative ventures, and coupled with lax oversight by the FSLIC, which insured most of them, and Federal bank examiners, sowed the seeds for the disaster. The FSLIC was bound, by law, to repay depositors for failures. The FSLIC was founded in 1934.

    The Feds weren't the only ones involved here. Many hundreds of the S&L's were state-chartered, and had no safety net, other than state regulators. The state regulators were even more lax than the Feds.

    The tax cuts in the early 1980's brought the U.S. out of a deep recession that was brought on by exhorbitant interest and inflation rates of the late 1970's. Remember the misery index, the total of the inflation and prime rates?

    The Federal system of accounting is what creates the growth of the deficit. Their accounting procedures would land the CFO of a major corporaion in jail, if the company ran its books the same way.

    The Federal deficit, at no time in the 1980's, outgrew the growth of the economy. That is, the percentage of deficit growth paralleled that of the GDP growth.

    The statement that the S&L crisis bred the sub-prime mortgage problem of late, is disingenuous, at best. The problem with the sub-primes, was generated in part, by Federal regulators who insisted that banks and mortgage brokers make risky loans to people who couldn't afford a down payment of up to 20%. The only way for the banks to make money was to try and forecast interest rate movement, creating the ARM market. Before you blame the "banks", please place the blame where it belongs; on the backs of the borrowers, who knew they were one payment away from insolvency.

    PS - Your citation comes directly from Wikipedia. However, please read the rest of the article. It provides a great deal of insight to the original S&L problem. This was no simple case of malfeasance. It was a manifestation of many occurrences, and resulted in a "perfect storm".

    Best,
    Dennis
     
  7. pendennis

    pendennis Well-Known Member

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    Deckart, this is exactly what the problem is. The government, at any level; Federal, state, local, is just not equipped to monitor the stupid decision-making of people. It has always been up to the individual to make the final decision before inking his/her name to a contract. Whether for a car, home, stereo, the user is responsible for debt.

    The reason for a lot of consumer laws, is the unbridled stupidity of most consumers. Always wanting everything for nothing, they buy things, lured only by the price. Each of those who want the $400k house making $60k annually, and using zero down, and an ARM, are stupid. No one has ever been able to legislate against stupid. Note that this doesn't include the old, or infirm. We must protect the weak in our society.

    Every 25-year-old wants the new Lexus, the tract home, the 72" TV. Never mind that they can only afford a used Focus, a 1000 sq ft ranch, and a 19" TV. When they get in over their head, let 'em. They'll learn, even if it's the hard way. Most valuable lessons are.

    For these folks losing their homes because of upside down conditions and sub-prime mortgages - too bad. Learn from the error.

    The government doesn't do anything good outside its basic charter. It doesn't do private finance well; witness the S&L problem. It doesn't do retirement funding well; witness Social Security. It doesn't do medical well; witness Medicare.

    Government doesn't care if it does things well or not. It's all about retaining power. Every time you vote for someone who promises you something free from the government, or promises to get even with evil corporations, you are part of the problem.

    It all starts at home. Momma and daddy cater to junior. Haul them off to soccer, baseball, football, ballet, gymnastics, tennis lessions, etc. Learn to tell the little rug rats no! You get to be privileged when you earn it. Momma and Daddy need to spend more on themselves and less on the kids. No kid ever died from a lack of tennis or golf lessons. You can afford the Perazzi when you pay for it. If you don't get it until you're fifty, good. You'll appreciate it more by then.

    There is a good quote from John Ruskin(1819-1900) -

    "There is hardly anything in this world that some man cannot make a litle worse and sell a little cheaper. Those people that consider price only are that mans lawful prey. It is unwise to pay too much, but it is worse to pay too little. When you pay too much all you lose is a little money, that is all. But when you pay too little, you sometimes lose everything because the thing that you bought was incapable of doing the things it was bought to do. The common law of business balance prohibits paying a little and getting a lot: it can not be done. If you deal with the lowest bidder, it is wise to add something for the risk you run, and if you do that you will have enough to pay for something better."

    Dennis
     
  8. J.Woolsey

    J.Woolsey Member

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    Deckart, read again, "J.P Morgan will provide secure loans to Bear Stearns for 4 weeks, insured in essence by the Fed" J.Woolsey
     
  9. The Rock

    The Rock Active Member

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    You get the money to buy a home you make an agreement to pay. You also know there is no way in hell you can pay for very long. But you can blame the banker for wanting to get paid? A lot of these were no money down so the buyer has no equity in the house so why even try to make payments you can't afford. You have nothing to lose and you got a new home while it lasts. Scream for the gov to bail you out and you get to keep it a little longer.

    The banks don't want the homes back they lose $6-7,000 on each one. But that is better than $350,000+ they put out to buy it.

    Buy a damn house that you can afford how hard is that?

    If you can't buy it to bad work and increase your wages and save a down payment.

    I see these homes going up and ask the wife who in the hell has that kind of money to buy these things. They are huge fancy estates compared to my humble abode.

    Or blame Bush of course.

    Rock

    Jim
     
  10. blizzard

    blizzard Active Member

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    ............and not only that Frank, The DEMOCRAT CONTROLLED CONGRESS WITH THE 23% APPROVAL RATING HAVE ABSOLUTELY NO RESPONSIBILITY FOR ANY OF IT!!!!!!!!!!!!!!!!!!
     
  11. blizzard

    blizzard Active Member

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    What a stupid ass...................
     
  12. J.Woolsey

    J.Woolsey Member

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    News
    03/16/2008 21:31:35 EST Mark Lennihan/AP Photo
    Related Quotes

    JPM 36.54 0.00



    JPMorgan to Buy Bear for $2 a Share
    By JOE BEL BRUNO and MADLEN READ
    AP Business Writers

    Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million.

    The stunning last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system sparked by the collapse in the subprime mortgage market. Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse.

    The Federal Reserve and the U.S. government swiftly approved the all-stock buyout, showing the urgency of completing the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.

    "This is going to go down in very historic terms," said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. "This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we're probably heading into a recession."

    JPMorgan Chase & Co. said it will guarantee all business - such as trading and investment banking - until Bear Stearns' shareholders approve the deal, which is expected to be completed during the second quarter. The acquisition includes Bear Stearns' midtown Manhattan headquarters.

    JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression, two World Wars and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.

    At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.

    "Having taking Bear Stearns out of the problem category, and the strong action by the Federal Reserve, we would anticipate the market will behave quite differently on Monday than it was Thursday or Friday," Cavanagh said.

    Some analysts expected it to be a brutal day for global stocks, nevertheless. Shortly after the news broke, Japan's benchmark Nikkei stock index plunged more than 3 percent in morning trading.

    A bankruptcy protection filing of Bear Stearns could have heightened anxiety in world financial markets amid a deepening credit crunch. So far, global banks have written down some $200 billion worth of securities slammed amid the credit crisis - more write-downs could come. Last week, a bond fund controlled by private equity firm Carlyle Group faltered near collapse because of investments linked to mortgage-backed securities.

    JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.

    "The past week has been an incredibly difficult time for Bear Stearns," Schwartz said in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."

    Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world's largest investments banks - it was a prop for the U.S. economy and the global financial system. An outright failure would cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.

    After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.

    This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail." On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.

    Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities - and what was once a cash cow turned into the investment bank's undoing.

    In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.

    The funds' demise and subsequent problems in the credit markets called into question Bear Stearns' ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.

    Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.

    Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."

    Before Greenberg's ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.

    ____

    AP Business Writers Jeannine Aversa in Washington and Stephen Bernard contributed to this story.
     
  13. J.Woolsey

    J.Woolsey Member

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    No I wanted to but my allergies are tearing me up. Hardwoods and pines are starting to pollinate here in NC. All choked up and sneezy. May next week. As they say "Shoot well and often." J.Woolsey
     
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