Posted on 03/26/2008 11:48:56 AM PDT by Toddsterpatriot
NEW YORK (Reuters) - About 60 protesters opposed to the U.S. Federal Reserve's help in bailing out Bear Stearns (NYSE:BSC - News) entered the lobby of the investment bank's Manhattan headquarters on Wednesday, demanding assistance for struggling homeowners.
Demonstrators organized by the Neighborhood Assistance Corporation of America chanted "Help Main Street, not Wall Street" and entered the lobby without an invitation for around half an hour before being escorted out by police.
"There are no provisions for homeowners in this deal. There are people out there struggling who need help," said Detria Austin, an organizer at NACA, an advocacy group for home ownership.
Bear Stearns employees were alternatively amused and perplexed, taking pictures on their cell phones.
"Homeowners, that's more than $1 trillion (in mortgage debt), you're crazy," one man in a suit screamed at a protester on the street.
On March 16, JPMorgan Chase & Co (NYSE:JPM - News) said it would acquire its rival the Bear Stearns Co Inc. for $2 per share, in a deal brokered by the Federal Reserve aimed at heading off a bankruptcy and a spreading crisis of confidence in the global financial system.
On Monday, JPMorgan raised its offer to about $10 a share to appease angry stockholders who vowed to fight the original deal. Bear Stearns traded at $10.86 a share at 1:30 p.m. EDT on Wednesday.
As part of the deal, the Fed agreed to guarantee up to $29 billion of Bear Stearns assets.
The agreement has raised concerns that the U.S. government is prepared to help rescue a failing Wall Street bank while declining to bail out millions of home owners facing the possibility of foreclosure.
(Reporting by Karen Brettell; Editing by Daniel Trotta and Cynthia Osterman)
They are apparently proetsting the employees of a company that purchased pools of mortgages that had been securitized after being originated by mortgage brokers who lent the protestors more moeny than they could pay back.
Essentially, they are angry for being considered less lazy and more creditworthy than they actually are.
I think they want to be considered “more lazy,” thereby qualifying for free homes.
LOL!
You guys were cool back when you just categorized airfoils and designed inlets. Now look at ya.
Me and my well worn "Abbott and Von Doenhoff" are ashamed.
(just joking)
LOL...
I'll bet a nickel that guy is a trader. Here's a diagram of the thought process:
take information
apply numbers
fail
And so, the bailout shows that we have become the “nutured and take care of me society.” (Yes, I know we are already there).
We need to find an open market way for this issue to fix itself, and not have the Washington or Wallstreet insiders benefit in the process.
I’ve tried explaining this to some people. The Bear-Stearns deal was not technically a “bailout”. It places several billions of taxpayer dollars at risk to rescue a large investment banking firm. That money may never be lost.
The argument that the money should have been spent to bail out homeowners who are over extended, would indeed costs 20-30 times the amount the government risked to save Bear.
The reason for saving Bear was to keep the investment banks from all folding, which would lead to massive chaos in our economic system and probably cause an avalanche similar to the big crash in the 1930s. If Bear failed, the other big guys would come tumbling down as investors made a run on these banks and cleaned them out.
That would have been a mega-economic disaster. I feel sympathy for homeowners who are having a hard time making ends meet in tight times, but i don’t have any sympathy for people who took loans without doing their homework or being realistic about what they could afford. These folks must feel some pain, as should many businesses, so they will remember before they get in this situation next time.
The fed has done more than enough with trimming interest rates. This is only prolonging and spreading out the pain that will, and needs to be, felt among many sectors. Pain in the economy is just like pain in the body, you don’t want so much the system goes in shock. But if your hand is on the burner, you need to feel pain so you will move it, and more importantly, not put your hand on the burner again.
See 10.
Who was bailed out?
You've tried in vain. It's easier to pick up a torch or a pitchfork than to examine what happened.
Let's hope they don't have to cut those year end bonuses.
Nobody should have to live on less than 3 Million a year.
You mean the restricted shares the officers got?
No, I realise what happened...and I understand it. I understand the fed is trying to fascilitate the market to dig itself out and fix itself in time, and that it will be painful for a while.
We, as a capitolistic society need to understand that “greed is good” but only to an extent. You can’t rob Peter to pay Paul for very long, before the reality catches up with you, and that’s what happened here.
However, when a major player isn’t so far over extended that it could collapse the entire banking system (and that statement in and of itself says something is foul) then they need to be left alone to die.
My point was that the approved fed deal gives the unreasonable idiots that over extended themselves, ligitimacy (in their mind) to argue from help from the federal government since they can’t make their payments.
If they could make their payments, we wouldn’t be in this mess. And, further more, if anyone was investing in a property and not their primary residence, they should be left to cover the loss as a business person, not a homeowner.
They should have protested at the Fed and the Treasury buildings.
So you favor a non-recourse loan of 30B by the Fed to JPM ?
It wasn’t that BSC got bailed out - it’s that JPM got a handout.
And sorry - the government risked nothing. The taxpayers have.
http://dailybriefing.blogs.fortune.cnn.com/2007/12/19/bear-stearns-bonus-breakdown/
No bonuses, apparently, in 2007.
Would CNN lie? $20 Billion in bonus money last year.
Maybe they should have put it in a 3 month CD instead.
Ok, no bonus last year for BS.
Still would think some of the $50 Gazillion or so they've paid out up to now would come in handy these days...
I thought you were talking about Bear Stearns?
You mean the restricted shares the officers got?
Not just 2007 - you can't pay people like you're minting money and then fold like a tent when the economy tanks.
They failed to follow their own advice - and the stockholders are paying the price.
Most of the officers get most of their bonus in the form of restricted stock. The vesting periods are usually 3 years.
They failed to follow their own advice - and the stockholders are paying the price.
Yes, the shareholders, including the officers and most of the employees, are paying the price.
No wonder they couldn't hang, all the talent must have left.
Never said the government risked anything. I specifically stated the taxpayer did. In this case, i support the loan to JPM. We are lucky that JPM accepted the deal. In fact, they were the only firm that would consider it seriously.
Think about the alternative and let me know if you think it was a bad idea. JPM, Merrill Lynch and all the other investment banks would have bitten the dust setting off a catastrophic collapse of our economy if Bear-Stearns folded. Risk $30 billion vs/ 10-15 times that much in GDP and the collapse of 401ks and IRAs across this country? Absolutely.
It was a necessary evil that is the result of over-exuberant business practices. Just like the outrageous speculation that proceeded the Great Depression. If you want to pick up a pitch fork, you need to go after the lenders and the lendees. You have your work cut out for you sir.
I am all for keeping the government out of the markets except in time of dire crisis. I feel the same about doctors and mechanics. Don’t take your car to the mechanic or let your doctor due surgery if your car or your body is not about to die.
Thanks.
No, they were just pissed that they didn’t get 30 billion.
Who said that? The officers got huge year end bonuses. The majority of those bonuses were restricted stock.
The lower level employees might also get very large bonuses. Their bonus would be more cash and less restricted stock.
Maybe if they had a $30 billion portfolio to pledge? Oh, right, they're already part of the $30 billion portfolio.
Secondly, I don't support anything done to prop up a zombie entity. The only way we will climb out of this mess is if the "mark-to-fantasy" or "mark to model" crap stops, and stops sooner than later.
Will this be extremely painful and generationally shattering ? Probably, yes, but the alternative is crony capitalism and fascism. Is that the system you'd prefer ? As the Fed props up the banks, the taxpayer/consumer are getting thrown under the bus. Dollar sinking, commodities going way up, incomes stagnant except for the upper 1%, stocks trading at valuation levels not reflected in any way by earnings, and real asset deflation.
Here's an outstanding commentary by a guy who really understands what's going on: http://market-ticker.denninger.net/2008/03/open-letter-to-president-and-others.html
LOL yep - the rapidly deflating portfolio :)
My son works for the mortgage division of Bear and his JOB is to help people with their crappy mortgages!
Next will be “The Million Deadbeat March”.
Well, why not, The Fed justed handed JP Morgan an 1 Billion Dollar building effectively free... assumed all the downside to Bears obligations nad give JP all the upside... If Fed is going to bail out Billionaires, why shouldn’t the little guy expect the same treatment?
Can’t have it both ways. Bears had no business being rescued.
bump
I agree, there were wealthy companies that could have paid more. Even wealthy individuals.
Well, no bonuses for the top brass. But they didn’t shaft their associates and VPs. No one would have kept working there on just their salary; the work isn’t worth it for the base. They would have gone elsewhere, so bonuses were paid in order to halt mass defections.
False. That 1B building came with 383B in liabilities attached to it, only 30B of which were guaranteed by the Fed.
assumed all the downside to Bears obligations
Not even close.
If Fed is going to bail out Billionaires why shouldn’t the little guy expect the same treatment?
The little guys are making out like bandits on this deal. If Bear failed, their loans would have gone to workout and then foreclosure. Rather than renegotiated loan terms, the little guy would have lost his house and the average taxpayer would have seen his house drop an extra 10% in value.
No individual emerged from Bear with a billion dollars - but tens of thousands are emerging with a roof still over their heads that would have been gone had Bear failed.
Don't think so, unless there's something in the mortgage contract that says the loan is callable.
Most likely the performing mortgages would have been picked up and the ones already defaulting would just continue into foreclosure.
The number-one issue roiling the mortgage markets is the 5-year Option ARM structure - the low, teaser interest rates are ending and the interest payment is resetting up to levels that many homeowners can ill afford.
The bank has two choices when these loans go delinquent: foreclose for nonpayment or work with the borrower to structure a new loan - maybe a fixed rate 30 year mortgage or some other alternative taht will keep the borrower in the house.
The latter option can only work if the entity structuring the loan is solvent - if Bear failed, there would be no option to restructure, the creditors would have to foreclose.
Most likely the performing mortgages would have been picked up and the ones already defaulting would just continue into foreclosure.
The mortgages were securitized into pools, making it harder for buyers to just cherry-pick the ones they want.
OK, that’s fine, but if the 5 year reset is not yet here (as it isn’t for any loan given after 2003) then these loans might still be “performing” for a while yet.
Remember, the securetized pools are in deep trouble sice foreclosure judges are not allowing foreclosures if the entity doesn’t have legal documentation.
The foreclosures that might stem from a BSC bankruptcy would be a long way off.
The building had no mortgage? LOL!
That's a good sound bite but does not reflect reality.
Correct.
I’m no fan of the “mark-to-model” tools myself. Any serious investor realizes that this does little to expose a company’s true risks. I agree with your sentiments on the “mark-to” models, and I also agree that certain sectors need to feel some pain. However,i see your logic akin to shooting a man in the face with a .45 to teach him a lesson.
Follow me here.
In particular, you make the comment, “As the Fed props up the banks, the taxpayer consumer are getting thrown under the bus”. - My retort to this statement is that the consumer/taxpayer was ALREADY under the bus. The foundations of our monetary system, our manufacturing/industrial infrastructure and our government’s liquidity have been “under the bus” for many decades. NAFTA and other trade agreements were the 10,000 pound straw that broke this camel’s back.
What I’m trying to say, is that the underpinnings of our economy have been gone for quite a while now. Our booming economy has been a shuffle and shuck game since the dot-coms. Its all pizazz and show, with nothing underneath.
If you allow a panic to destroy our banking system, you destroy the illusion of an economic giant. You pull back the curtains, and what you thought was a wizard, is just a decrepit old man with megaphone.
Our economy is so tied into other world economies now. If the US banking system, and even worse, the US Bond were to lose its backers around the world..... GAME OVER. Welcome to the 3rd world.
What I’m trying to say is that this deal is analogous to the wizard’s curtain being opened. But just as it opened and the decrepit old schneister became visible, this deal shut the curtain.
The foundations of our greatness are now gone. We pissed it away. Partly out of gluttony and partly out of a utopian vision of the rest of the world.
Just remember, this is a street corner game now. Nothing but jive talk, smoke and mirrors and slick talk. The US government, the business world, nor the taxpayer/consumer can put their money where their mouth is. The United Debtors of America. You might want to think twice about pulling that curtain back. If you want to fix the problem, it is much more than a banking deal or “bailing out” anyone.
I bookmarked your link. I will take a gander at a later time. Thanks.
Many financial instruments don’t have a market value. There is no option but to use a model to value them.
The accounting rules state that you have to use Level 1 or Level 2 if it is at all possible. If it is not, you go to Level 3. You may not like it, but please let the FASB know if you can figure out how to value a financial instrument that has never been traded in any market.
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