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Fed acts Sunday to prevent global bank run Monday ( Bear Stearns Taken over,...rates cut )
MarketWatch ^ | 9:40 p.m. EDT March 16, 2008 | Rex Nutting, MarketWatch

Posted on 03/16/2008 6:52:34 PM PDT by Ernest_at_the_Beach

WASHINGTON (MarketWatch) -- Acting quickly to prevent a run on major global financial firms, the Federal Reserve cut its discount rate by a quarter percentage point to 3.25% and offered to lend money to a longer list of firms than ever before.

he extraordinary weekend moves came as J.P. Morgan Chase sealed a deal to buy Bear Stearns Cos. for just $2 a share backed by funds borrowed from the Fed. The Fed board gave its approval to that unique funding arrangement, which guarantees JP Morgan against losses from buying Bear. See full story.

The Fed board also approved the creation of a special lending facility through the New York Fed that would be available to members of its primary dealers list, which includes both commercial banks and investment banks. Investment banks, such as Bear Stearns, have not been allowed to borrow directly from the Fed.

JP Morgan has access to the discount window through its Chase Bank subsidiary, but Bear Stearns does not have direct access.

Events have unfolded at warp speed over the last week. On Tuesday, the Fed announced a new lending program for primary dealers in the bond markets, but that program won't go into effect for two more weeks. On Friday, the Fed allowed Bear Stearns to borrow money via JP Morgan in a desperate bid to save the firm, which has been pummeled by losses on exotic securities backed by subprime mortgages.

The Federal Open Market Committee meets on Tuesday. Analysts expect the FOMC to cut the target for the federal funds rate by as much as a full percentage point to 2%. Another cut in the discount rate is also likely.

(Excerpt) Read more at marketwatch.com ...


TOPICS: Business/Economy; Front Page News; News/Current Events
KEYWORDS: 1929; bernanke; con; discountrate; economy; endofthedollar; fed; manipulation; profit; soros; stpatricksmassacre; subprime
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To: TigerLikesRooster
All eyes will be on New York tomorrow at 0930 AM.

The fall of the giant construction crane might be taken as a bad omen. It's not big news outside of NY city, but it is a giant story locally, and some might read symbolism into it.

61 posted on 03/16/2008 7:33:25 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: irish guard
I don’t really think this was as much of a bailout as you might think. ... and....JPM Chase now makes good on those obligations and all Bear shareholders lose everything.

JP Morgan got a steal of a deal if I got the facts right. They pick up Bear for next to nothing, and the Fed guarantees some $30 Bn in dicey assets that no one is able to price. It is a bailout of the banking system, but it is not a bailout of the Bear Stearns shareholders. They are essentially wiped out, getting $2 a share for something that sold at 70 or 80 a week ago, and up to 170 a year ago. No one knows what the true worth would be without the Fed guarantee that JPM is getting, but it would probably be negative. That's why the guarantee had to be made for JPM to be able to make the deal.

It also makes me think that JP Morgan Chase be in better shape than the other big guys. You didn't see a bidding war, or multiple offers from other investment houses (Goldman, Merrill, Morgan, Lehman) or money center banks (Citi, HSBC, etc.).

62 posted on 03/16/2008 7:33:50 PM PDT by Pearls Before Swine (Is /sarc really needed?)
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To: AmericanInTokyo

I’ve been watching Bloomberg TV, they are live from the Asian exchanges.


63 posted on 03/16/2008 7:34:41 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Ernest_at_the_Beach

Looking like S&L Deja vu all over again.


64 posted on 03/16/2008 7:34:46 PM PDT by Mad_Tom_Rackham ("The land of the Free...Because of the Brave")
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To: Lazamataz
lol. Point taken. We'll see though.

Markets are panicking already. 24 hours from now it's gonna be even worse. By the time the week is out and the top 5-10 banks report their earnings, it can be even worse.

The markets don't only work by numbers. They also work by mob psychology.

And the sheep are gonna stampede methinks.

65 posted on 03/16/2008 7:35:04 PM PDT by HeartlandOfAmerica (Don't blame me - I voted for Fred and am STILL a FredHead!)
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To: HeartlandOfAmerica
“Several brokerage houses tumbled; blue-sky investment companies formed during the happy bull market days went to smash, disclosing miserable tales of rascality; over a thousand banks caved in during 1930, as a result of marking down both of real estate and of securities; and in December occurred the largest bank failure in American financial history, the fall of the ill-named Bank of the United States in New York.” ~~"Only Yesterday: An Informal History of the 1920’s" by Fredrick Lewis Allen
66 posted on 03/16/2008 7:35:55 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Hacklehead

Ok, got it. So you are saying I should stock up on wipes and cheezits?


67 posted on 03/16/2008 7:36:43 PM PDT by Southerngl
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To: Travis McGee; hiredhand

Damn.... hate it when rumors are better than average....


68 posted on 03/16/2008 7:36:43 PM PDT by Squantos (Be polite. Be professional. But, have a plan to kill everyone you meet.)
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To: Ernest_at_the_Beach

Nah, I found it humorous. But thanks! Such a gentleman Mr. Ernest!! Us southern girls like that in a man.


69 posted on 03/16/2008 7:37:23 PM PDT by Southerngl
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To: Travis McGee
Well, I guess can start thinking about calling it the "St. Patrick's Day Massacre of 2008" (Quote Source: AmericanInTokyo), even before we officially move into 17 March in the states.

There may well be LOTS of reasons to go for many, many Guinness Beer's tomorrow night in watering holes all over the fruited plain come quittin' time (maybe even before.

70 posted on 03/16/2008 7:37:23 PM PDT by AmericanInTokyo (The GOP serves a huge cr*p sandwich every 4 years to Conservatives, & sez "shut up!, no choice!")
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To: Southerngl

The financial markets — US, other countries, stocks, bonds, bank debt, currencies, commodities, and derivatives of all these, including things traded on exchanges and things traded directly between buyers and sellers, are:

1) All very tightly intertwined with each other, and

2) Highly leveraged (i.e. most participants “own” a lot more than they’ve paid for, similar to somebody buying a house with 5% or 20% down).

When a huge player goes under and can’t meet its margin calls (requirement to putting up more money for what they “own” when the market prices goes down), this immediately starts causing problems for everybody else at all points in all markets. This is what the Fed HAD to stop, and they had to stop it before 8PM EST, because that’s when the Asian markets open.

If the Asian markets started tumbling hard, in anticipation of the problems about to hit from Bear failing, that would cause unmet margin calls to start piling up all over the place, and a huge flow of asset sales at fire sale prices to cover margin calls, which would cause further tumbling of asset prices — all before the US markets even opened. All hell woulld have broken loose. Things could still be pretty rough in tomorrow. And there are likely to be more emergencies of this nature in the coming months.


71 posted on 03/16/2008 7:37:28 PM PDT by GovernmentShrinker
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To: Squantos

Freepmail, then I gotto get some writin’ done in the other room.


72 posted on 03/16/2008 7:37:35 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Hacklehead

“Paging Mr. Little. Mr. Little, call in the vestibule. Mr. Chicken Little.” cluck cluck! LOL


73 posted on 03/16/2008 7:38:51 PM PDT by AmericanInTokyo (The GOP serves a huge cr*p sandwich every 4 years to Conservatives, & sez "shut up!, no choice!")
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To: DWC
Out come the chicken littles.

Too late. It fell.

74 posted on 03/16/2008 7:40:31 PM PDT by AndyJackson
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To: GovernmentShrinker

Next will be to watch European markets when they open in the late afternoon our time here in Tokyo, watching this thing make itself away around the globe, from East until West, until the hour of reckoning tomorrow in NYC at 0930, as was mentioned.


75 posted on 03/16/2008 7:41:48 PM PDT by AmericanInTokyo (The GOP serves a huge cr*p sandwich every 4 years to Conservatives, & sez "shut up!, no choice!")
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To: Travis McGee
Wall street forecast for tomorrow:

it will start raining investment bankers, beware of falling three piece suits and broken glass/dreams.

76 posted on 03/16/2008 7:42:07 PM PDT by central_va (Co. C, 15th Va., Patrick Henry Rifles-The boys of Hanover Co.)
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To: AmericanInTokyo

You never know. These things usually manage to come when they are not expected. Tomorrow might be just another day.


77 posted on 03/16/2008 7:42:42 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: central_va

NZ market hit by US meltdown
17/03/2008 15:04:01

The New Zealand Stock Exchange has taken a hit, sliding almost two percent on the back of investor fears that more financial institutions could become casualties in the widening US financial crisis.

One of the major US investment banks’, Bear Stearns, cash reserves were drained by fleeing customers prompting its sale at a rock bottom price to JP Morgan Chase and Company.

Stock broker Chris Lee says the repercussions of the Bear Stearns situation is being felt in New Zealand - but banks operating here are not in trouble.

He says New Zealand banks will have much bigger write offs over the next couple of years, but he does not see any of them falling over or coming anywhere near falling over.

Mr Lee says the banking system in New Zealand and in Australia are in much better shape than the rest of the world.


78 posted on 03/16/2008 7:43:40 PM PDT by AmericanInTokyo (The GOP serves a huge cr*p sandwich every 4 years to Conservatives, & sez "shut up!, no choice!")
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To: DuncanWaring
..all Bear shareholders lose everything. I wonder how many margin calls that's going to trigger.

That is an interesting observation. What is more interesting is that the Bear shareholders who will lose everything could quite possibly be Bear shareholders for less than a few hours of the last business day. The volume of BSC on Friday was more than the number of outstanding shares. It could well be the shennigans of Friday was opportunity for some really big holders to dump some shares before things really got as bad as 2 dollars a share. You can read some financial blogs and groups tonight where some people stepped up on Friday and bought, and those definitely will be margin calls first thing Monday morning. That is the way of the Street, there is always smart insiders who find a way to leave someone other than themselves holding the bag. And anyone holding a stock going from 30 something to 2 dollars in a day would be a classic definition of bag holder.

79 posted on 03/16/2008 7:44:09 PM PDT by Biblebelter (I will NEVER EVER vote for McCain or any other current Senator.)
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To: Ernest_at_the_Beach

BSC has to many counterparty trades with Citi to let BSC (Bear) Fail. The Fed and JP Morgan could not let that Happen. Tommarow will be a very important day to be sure we get thru this. While everyone is publicly talking about LEH be the next problem, the Whispers are the big problem that the FED cannot let fail is Citigroup.


80 posted on 03/16/2008 7:44:09 PM PDT by BQ91
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