Posted on 04/25/2008 4:49:58 AM PDT by Renfield
There is some Interesting circumstantial evidence circulating on the web suggesting the Bear Stearns liquidation and takeover was actually to disguise the federal bailout of JP Morgan. Posing this hypothesis is John Olagues, owner of Truth In Options and a recognized authority on listed and employee stock options.
He argues that there are far too many coincidences and oddities with this deal that don't add up, although odd coincidences are certainly not uncommon occurrences in the halls of high finance. Why would the Federal Reserve Bank, the S.E.C, the Treasury Department, and Congress participate much less cooperate in such a massive intervention- i.e. to the tune of $55 billion? The reason they all so readily agreed is because you can't have the leading bank of the leading economic power be insolvent, and that's that! This explains why there have been so little fireworks over this deal. After all, who wants to take the blame for triggering the collapse of the global financial system? Congress, the Fed, Treasury-oh no- no way.
Olagues supports his theory detailing unusual and massive buying of puts and shorting of Bear Stearns stock just days before the announcement of the JP Morgan takeover. He cites the highly irregular request made to open a new April series of puts with strike prices of 20 and 22.5 when the stock was trading at 70. I surmise the insiders were Bear shareholders and employees tipped off to what was afoot to gain their cooperation in the bailout. How else to [explain] the muted protests of the employees and shareholders in the days after the takeover was announced. Bloomberg and others are reporting that JP Morgan is signing up most of the Bear executives.
Former Bear Chairman, Alan "Ace" Greenberg agreed to stay on- for a handsome sum- saying in an interview "I'm very excited.' Bear employees reputedly owned 1/3rd of the company, the JP Morgan deal hands them a loss of 85% of their share value, and Ace says "he's very excited." Really, he just lost 85% of his share value and he's excited. Come off it, this is simply not believable.
Olagues lays out his case: The official assurances of Bear Stearns liquidity in the media on Monday, the 11th Tuesday, the 12th and Wednesday the13th followed by the collapse on Friday the 14th. The obvious insider trading during the period. This followed by the ridiculous show hearings in the Senate on April 4th all leading to the inescapable conclusion that this was really a government funded $55 billion recapitalization of JP Morgan.
Don't worry, there'll never be investigation, there is far too much at stake to risk that.
I have heard what is essentially this theory floated around now for a few weeks. I don’t know how accurate it is, but the scenario is quite believable.
And of course, the execs of Bears will be “taken care of” - while the worker bees have lost their entire pension - even long-time employees.
ΜΟΛΩΝ ΛΑΒE
Your 401K plans are nothing but corporate welfare to investment firms. They don't even have to compete and work for it. The tax code and hyped insolvency of Social Security has Wallstreet skimming 15% and that's too much cash to be invested wisely by fund managers. There biggest problem is just what to do with all that cash that arrives every month thanks to the IRS.
How would the outcome have been different, better or worse for the shareholders had the government left the company to bankruptcy?
If insiders traded on knowledge then they will pay the price. To believe governments never intervene in the markets is absurd since they buy and sell gold, buy and sell currencies for purely selfish reasons.
The question ought to be not if the government intervened here, but if it did was the over all result positive or negative for the greatest number of people. Compare this to what would have happened had they stayed out and left it to market forces.
If the alternative was a 100% lose, it would be reasonable to be excited.
How did this supposed $55 billion help JP Morgan?
Olagues lays out his case: The official assurances of Bear Stearns liquidity in the media on Monday, the 11th Tuesday, the 12th and Wednesday the13th followed by the collapse on Friday the 14th.
A run on the bank never impacts liquidity? LOL!
The obvious insider trading during the period.
I'll wait for the proof.
I think a better question, and more to the root of the problem, is why the hell the government is involved at all in supposedly private enterprise. The more government is involved in private enterprise, the more often, I think, we'll see situations like this happen. Rather than let the market take care of itself, the government steps in to try and keep the status quo. This doesn't promote healthy growth in a free economy.
The Private New York Fed lent $25 Billion to Bear Stearns and another $30 billion to J.P. Morgan. So the bail out cost was $55 billion not the $30 billion that is promoted. This was revealed at second session of the Senate hearings in a James Dimon response to a question from Senator Reed.
Who gets the $55 billion? J.P. Morgan got the money on a loan pledging Bear Stearns assets valued at $55 billion; $29 Billion is non-recourse to Morgan.
Effectively the Fed got collateral appraised by Bear Stearns at $55 Billion for a loan to J.P. Morgan of $55 Billion.
I get it, this options "expert" thinks a collateralized loan is a bailout. That's funny. I guess JP Morgan couldn't borrow money from the Fed without the "sham" purchase of Bear Stearns. Now it all makes sense. LOL!
Or maybe the goverment’s LIMITED intervention should come before the collapse is imminent. Then again, how much of the current crunch is caused by or encouraged by the government?
All one has to do is look at what has happened to the public schools in this country - for the most part, the more heavy the hand of government, the worse they have become. And that same hand tends to really mess up business/markets as well.
OF course, if we want a relatively socialist roll for the government, then we can mirror the French system...
Yeah, because it would make the author of this article and the source he cites look like black helicopter idiots.
And there are a million gold bugs who'll believe it.
ROTFLMAO!
What a bunch of nonsense.
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