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The Securities and Exchange Commission failed in its oversight of investment bank Bear Stearns, ignoring that the company took excessive risks with mortgage-related securities before its demise, according to a report released yesterday by the agency's inspector general. In a review of the agency's supervision of investment banks, inspector general David Kotz said that the SEC had identified "numerous, potential red flags prior to Bear Stearns' collapse . . . but did not take action to limit these risk factors." J.P. Morgan Chase bought Bear Stearns last March after initial emergency funding to keep it operating failed. SEC Chairman Christopher...

I have written here before that government interference in the economy delays the inexorable forces of economic laws, which in turn magnifies the corrections that must inevitably take place. More government regulation was not going to save Lehman Brothers from bankruptcy. It may have delayed bankruptcy, but reality would still triumph in the end to produce an even greater disaster. A government doing everything it can to forestall and conceal the most catastrophic pending collapse in economic history should not be trusted with anyone’s assets. The failure of Social Security will make Lehman Brothers look like chump change. Lehman did...

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Reuters) - Mortgage lenders Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) are "insolvent" and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg. "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole was quoted as saying in an interview held on Wednesday. Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying. Shares...

Although the collapse of Bear Stearns happened back in March, the debate still rages as to what led to the failure of the 85-year old investment bank that had survived years of previous turmoil, including the Great Depression. After JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon appeared on PBS's "The Charlie Rose Show" July 7 and commented on an August 2008 Vanity Fair article alleging that CNBC reporting could have been part of Bear Stearns' downfall, the cable channel's on-air editor Charlie Gasparino criticized what was claimed in the article and Dimon's reaction on CNBC's July 8 "Power Lunch." "Well, you...

“Where there’s smoke, there’s fire,” is the way JP Morgan Chase CEO Jamie Dimon described the impact of rumors on the downfall of investment bank Bear Stearns. Dimon appeared in a taped interview from Aspen, Colo. on the July 7 broadcast of PBS’s “The Charlie Rose Show.” He discussed the possibility of impropriety involving the collapse of Bear Stearns (NYSE:BSC), which led to the eventual JP Morgan’s (NYSE:JPM) discounted buyout of the beleaguered investment bank. “I would say, ‘Where’s smoke, there’s fire,’” Dimon said. “I’ve heard it. I don’t have evidence of it. I think the Securities and Exchanges Commission...

How did the U.S. financial crisis happen? A review of the road to ruin reveals a course littered with more villains than heroes. No, it’s not the Great Depression, but the United States is facing a nasty economy-wide retrenchment following the excesses of the 2000s, with no easy way to dance through it. Think 1979 to 1982, when then U.S. Federal Reserve Chairman Paul Volcker exorcised consumer price inflation from the economy. The difference today is that the inflationary explosion has been absorbed by prices of assets—houses, stocks and bonds, office buildings—rather than by the prices of things you buy...

The Federal Reserve Bank of New York said on Thursday that it has extended a $28.82 billion loan to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) for the acquisition of Bear Stearns. "Total credit extended by the New York Fed is lower than originally anticipated as a result of an extensive review of the portfolio," the New York Fed said in a statement on its Web site. In addition, JPMorgan has extended a $1.15 billion loan to a Delaware limited liability company (LLC), the statement said. The LLC, which will be consolidated on the books of the New York...

More than 400 people have been arrested since March as part of a sweeping Justice Department crackdown on alleged mortgage fraud schemes. Ex-Bear Stearns execs could face criminal charges for misleading investors. More Photos The FBI said the schemes — 144 mortgage fraud cases, resulting in 406 arrests between March 1 and June 18 — caused $1 billion in mortgage losses and have contributed to the nation's housing crisis. The arrests, dubbed operation “malicious mortgage,� were announced Thursday along with the separate indictments of two Bear Stearns hedge fund managers on fraud, conspiracy and insider trading charges — the first...

Two former managers at investment bank Bear Stearns have been arrested in New York over the collapse of the bank's hedge fund last year. Reports say Ralph Cioffi and Matthew Tannin will face charges in connection with their management of hedge funds that collapsed in June 2007. The bank's hedge funds bet on the high-risk sub-prime mortgage market in the US before it collapsed. Authorities in Brooklyn are due to give details about the case later. FBI spokesman Jim Margolis told the BBC the men faced criminal charges of "securities fraud related to their management of two Bear Stearns hedge...

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...

Bear Stearns Cos. disclosed that its stock and bond sales and trading business, long the cornerstone of its franchise, plunged "precipitously" following the cash crunch that forced the Wall Street firm to agree to sell itself to J.P. Morgan Chase & Co. for a fire-sale price. The decline to "well less than 50% of activity levels in 2007 and in the first quarter of 2008" was revealed in a securities filing Friday that gave the most specific details yet about the customer exodus that continued even after Bear Stearns agreed to the takeover on March 16. As of March 24,...

All we hear these days is whining from reckless home borrowers and their banks. But did you know that renters are 32 percent of American households? And that homes in foreclosure are less than 2 percent? So why is Congress rushing to bailout high-flying borrowers and their lenders with our tax dollars? Unfortunately, renters aren't as good at politics as the small minority of homeowners (and their bankers) who are in trouble. We don't have lobbyists in Washington, DC. We don't get a tax deduction for our rent and we don't get sweetheart government loans. Quite simply, we are just...

While conservatives inside the administration are unhappy about intervention in markets, President Bush seems content with how the Federal Reserve and Treasury cooked up the deal with erstwhile colleagues in Wall Street. There is little conservative or Republican about the administration's approach to the fiscal crisis, as reflected in Room G-50. Uncritical Democratic senators were not even inquisitive. The closest a senator came to asking who set the price for JPMorgan was this apologetic question from Committee Chairman Christopher Dodd: "There's just reports -- I want to share them with you -- that JPMorgan Chase would make an offer of...

"Oh, no! Two dollars!" So cried investors three weeks ago. The Federal Reserve had just announced that it was lowering the discount rate by a quarter of a point and had arranged for the sale of Bear Stearns to JPMorgan Chase. Stock futures jumped on news of the discount rate cut and Bear sale until investors heard the price. The market's anxiety was justified. If a legendary Wall Street investment bank that investors valued at over $100 per share just last December was suddenly worth next to nothing, what were the other Wall Street firms, such as Goldman Sachs, Merrill,...

Is the worst over? For the first time since financial turmoil began in August last year, some respected experts are beginning to speculate that the worst of the credit crisis may now be past. Stanley Fischer, governor of the Bank of Israel, says the Bear Stearns rescue might be a “turning point”. His view is shared by Larry Summers, the former US Treasury secretary, who wrote in the FT last week: “It is not unreasonable to hope that, in the US at least, the financial crisis will remain in remission.” Some analysts also agree. “Increase risk exposures,” JPMorgan advised clients...

NEW YORK (Reuters) - Bear Stearns employees are flooding Wall Street with their resumes as the firm is acquired by rival JPMorgan Chase, but the job market looks bad, investment bankers and recruiters said. On Friday, JPMorgan announced its first top-level management jobs since the banks initially reached their agreement to merge on March 16. Of 26 executives named to executive positions in the investment banking and trading division, only five are from Bear Stearns. One banker at a rival firm said resumes have been coming in from not just current Bear employees, but also business school graduates whose offers...

Last week, a mob of screeching protesters invaded the Bear Stearns headquarters in Manhattan demanding more aid for homeowners. As you know, I oppose federal bailouts of every make and model — and that includes both the Bear Stearns deal and the bipartisan stimulus-palooza in Washington. But the bank-bashers who held their demonstration in New York City against Bear Stearns and JPMorgan are totally unhinged. And out of control. Here is the face of the entitlement culture gone mad: "We will go to their neighborhood, we will educate their children on what their parents do. They should be ashamed," said...

Thursday's Senate hearing on the Bear Stearns bailout included a lot of obligatory testimony and political grandstanding, which was predictable. Missing from the dog and pony show, however: Any sense of accountability from Bear CEO Alan Schwartz. Schwartz blamed the disaster on a "run on the bank" stemming from "unfounded rumors and attendant speculation [which] became self-fulfilling." And while it's true rumors persist that Bear Stearns was the target of short-sellers, rumor-mongering is part of the reality on Wall Street. Schwartz also cited an "honest disagreement" over the length of a short-term lending facility granted by JPMorgan days before Bear's...

Bob Reich, whom I knew vaguely long ago, writes a demagogic column for the American Prospect about the Bear Stearns "bailout": Some of the dollars I'm sending to Washington are now being used to backstop Wall Street investment bankers, hedge fund and private equity managers, and anybody else associated with a borrower that's too big to fail. The reason they're too big to fail is they've borrowed so much from me and from you - from our pension funds and money-market funds - that if they went bust, our savings would disappear. *** The reason they've been able to borrow...

“Explain the logic of this? The Bank of Bernanke takes $29 billion in Bear's toxic real estate debts, but lets Bear Stearns' skyscraper go to JPMorgan for a song? Why didn't the Fed take control of Bear's one real asset and rent it out to JPMorgan with the proceeds going back into federal coffers?”…American taxpayers are potentially on the hook for $29 billion…yes, $29 billion… “$66 billion. That is the record amount of money Wall Street's top five firms…paid out in compensation and bonuses last year to their 186,000 employees…” “At Merrill Lynch, they paid out $15.9 billion in compensation...

WASHINGTON (MarketWatch) -- Following is the text of remarks that Timothy Geithner, president of the New York Federal Reserve Bank, delivered Thursday before the Senate Banking Committee, as provided by the bank. Good morning, Chairman Dodd, Ranking Member Shelby, and other members of the Committee. Thank you for giving me the opportunity to appear before you today. I am here to outline the actions by the Federal Reserve Bank of New York in response to present challenges in financial markets, including those in relation to the proposed merger of Bear Stearns and JPMorgan Chase. On the evening of Thursday, March...

US senators expressed concern Thursday that billions of dollars in taxpayer funds has been put on the line to back the emergency takeover of troubled investment bank Bear Stearns. Republican Senator Jim Bunning branded the move an act of "socialism," as the Senate Banking Committee held a hearing into Bear Stearns' takeover by banking giant JPMorgan Chase. JPMorgan Chase agreed to take over Bear Stearns for just over one billion dollars last month in a deal backed by the US central bank which stumped up 29 billion dollars to support the transaction in exchange for collateral from Bear Stearns. The...

April 3, 2008 Ben Bernanke admits Bear Stearns was hours from collapse Dearbail Jordan US Federal Reserve chairman, Ben Bernanke, today revealed that Bear Stearns was just one day away from going bust when the central bank stepped in to save the Wall Street bank to prevent chaos and a "severe" impact on confidence. Speaking for a second day in front of US Congress, Mr Bernanke attempted to justify JP Morgan Chase's rescue of Bear Stearns, in a deal that included the US Fed agreeing to back $29 billion of the troubled investment bank's assets. Mr Bernanke said: "... on...

Last week, a mob of screeching protesters invaded the Bear Stearns headquarters in Manhattan demanding more aid for homeowners. As you know, I oppose federal bailouts of every make and model — and that includes both the Bear Stearns deal and the bipartisan stimulus-palooza in Washington. But the bank-bashers who held their demonstration in New York City against Bear Stearns and JPMorgan are totally unhinged. And out of control. Here is the face of the entitlement culture gone mad: “We will go to their neighborhood, we will educate their children on what their parents do. They should be ashamed,” said...

The securities backing a $29 billion Fed loan to Bear Stearns Cos. consist primarily of “mortgage backed securities and related hedge investments,” the Treasury Department says. ..snip... Treasury also supplied a letter from Secretary Henry Paulson to Federal Reserve Bank of New York President Timothy Geithner, dated March 17, saying, “On behalf of the Department of Treasury, I support this action as appropriate and in the government’s interest, and acknowledge that if any loss arises out of the special facility extended by the FRBNY to JPMCB [J.P. Morgan Chase Bank], the loss will be treated by the FRBNY as an...

There was a real irony in the recent intervention by the Federal Reserve System to provide the money that enabled the firm of JPMorgan Chase to buy Bear Stearns before it went bankrupt. The point was to try to prevent a domino effect of panic in the financial markets that could lead to a downturn in the economy. The irony is that it was almost exactly a hundred years ago -- 1907, to be exact -- that the original J.P. Morgan arranged a bailout of a troubled financial institution for the same purpose of preventing a panic that could end...

Never has one word been used so many times by so many people who think they know what's best for our sluggish economy than the word "taxpayers." Take the New York Times, for example. On Sunday, an editorial discussing the steps that the Federal Reserve recently took to prevent Bear Stearns Companies Inc. from going bankrupt mentioned the word "taxpayers" no less than nine times. -SNIP- Like many others, the Times is worried that taxpayers will bear some or all of the cost of rescuing Bear Stearns, and thus averting a possible crisis to our financial system. I'm not so...

WASHINGTON -- The cover of the latest issue of BusinessWeek shows Ben Bernanke in profile against a bright red and orange backdrop, pensively stroking his grey beard and looking remarkably like Vladimir Ilyich Lenin. The imagery is intentional and pointed. From BusinessWeek to The Wall Street Journal and beyond, the U.S. business elite has awoken to the realization that the U.S. Federal Reserve Board, backed by the Bush administration, has embarked on a revolutionary course to save financial capitalism from implosion. It isn't just about the Bear Stearns rescue, which Mr. Bernanke greased with a $30-billion (U.S.) loan. Mr. Bernanke's...

Two days ago, I wrote here on the widely-reported $30 billion loan that the Federal Reserve made as part of brokering the acquisition of the Bear Stearns Companies by JP Morgan Chase (the "St. Patrick's Day Massacre"). I now have much more information on what this deal is all about. I guessed quite wrong about the deal structure. The $30 billion loan is not a term repo as I originally thought. Nor is it likely to generate monetary losses for taxpayers. (In fact, the opposite is true.)But it is something bold and different that's worth understanding. In fact, it's a...

The "headquarters curse" — the idea that the moment a company starts planning a fancy new headquarters is the moment for smart investors to start bailing out of its stock — is being given new currency by events here in New York. The most recent example is Bear Stearns, which, according to the Web site of Good Jobs New York, a group that opposes special subsidy deals for businesses, was granted $75 million in tax breaks by the Giuliani administration in 1997 to build a new 1.1 million square foot world headquarters at 383 Madison Avenue, designed by Skidmore, Owings...

When is a billion-dollar loss a bonanza? When the person suffering it is one of those greedy Wall Street types the MSM loves to hate. Check out how, in opening this morning's show, Today cast the situation of Bear Stearns Chairman James Cayne: MATT LAUER: Payday! His company imploded and thousands of stockholders went bust, but the Chairman of Bear Stearns cashes in and gets $61 million dollars. Will there be a backlash? Watching the intro, I assumed the Chairman, despite Bears' fall, had received some kind of bonus or golden handshake. But it wasn't until Maria Bartiromo came on...

The past 10 days will be remembered as the time the U.S. government discarded a half-century of rules to save American financial capitalism from collapse. On the Richter scale of government activism, the government's recent actions don't (yet) register at FDR levels. They are shrouded in technicalities and buried in a pile of new acronyms. But something big just happened. It happened without an explicit vote by Congress. And, though the Treasury hasn't cut any checks for housing or Wall Street rescues, billions of dollars of taxpayer money were put at risk. A Republican administration, not eager to be viewed...

Bear Stearns Cayne Sells Stake for $61.3 Million Ahead of JPMorgan Deal NEW YORK (AP) -- Bear Stearns Cos. Chairman James Cayne on Thursday sold his holdings in the embattled investment bank ahead of its expected acquisition by JPMorgan Chase & Co. Cayne sold 5.66 million shares for exactly $10.84 a share for $61.3 million. However, it was not known if those shares were dumped into the open market or if Cayne sold them to another party. A spokesman for Bear Stearns would not comment on the sale. JPMorgan has offered about $10 per share in its acquisition of Bear...

NEW YORK (Reuters) - Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research) asked a court on Wednesday for an injunction to prevent five former employees from using Bear Stearns' client lists in their new jobs at other banks. The request for an injunction comes as Bear Stearns struggles to hang onto clients after a run on the bank forced it earlier this month to agree to sell itself to JPMorgan Chase for a fraction of its prior market value. Bear Stearns asked the New York State Supreme Court in Manhattan to force the former employees to return client lists or...

What do you call it when the stock of the country’s fifth-largest investment bank trades at $50 on a Thursday and at $3 the following Monday? It’s been called the most dramatic fallout from the credit crisis, an epic stock analysts’ whiff, and one of Wall Street’s greatest collapses. All true. But I call it something else. I call it a bottom. Not just for the stock itself, which happens to be the venerable Bear Stearns, but for the whole stock market, and for the long-suffering housing market, too.

Seen in the Fed's magic mirror, Bear Stearns appears to be worth it Carl Mortished: World business briefing “Yo! Ben Bernanke! Give us a million dollars. I promise to pay it back as soon as I cut a deal. You want collateral? I'll give you collateral. “I got a house — the realtor says he can sell it tomorrow for half a million. A condo in Florida, two cars, a boat and a stock portfolio — that must be worth a hundred grand. “Whaddya mean, what's it all worth? Don't worry, Mr Bernanke, I'm not going bust. I just need...

Insight: Bear Stearns rescue was easy part of crisis management By John Plender Published: March 25 2008 18:22 | Last updated: March 25 2008 18:22 So Bear Stearns is back in business under new ownership after decisive intervention by the Federal Reserve. Existing home sales in the US are suddenly picking up. Banks’ shares are, mirabile dictu, upwardly mobile in Europe. In one bound we appear to be free. But not for long, in my judgment. It is, admittedly, positive for short-term market confidence that the Fed has demonstrated an unambiguous urge to throw everything that can be thrown at...

Adam Smith’s invisible hand has a puppeteer: the Federal Reserve. In case there is any confusion about who was pulling the strings behind the scenes of JPMorgan Chase’s acquisition of Bear Stearns, the curtain was lifted Monday. By raising its bid — with the grudging approval of the Fed — to $10 a share, from $2, JPMorgan exposed what had long been whispered about but no one dared to say aloud: the Fed is officially in the deal-making business. .....the Fed’s fingerprints were all over the new pact. In an action almost unprecedented in takeover history, JPMorgan bought 39.5 percent...

NEW YORK, March 24 (Reuters) - The Federal Reserve Bank of New York said on Monday a subordinated note and a loan in a takeover offer by JPMorgan Chase & Co. (JPM.N: Quote, Profile, Research) of Bear Stearns Cos (BSC.N: Quote, Profile, Research) will have a term of 10 years, and will be renewable by the New York Fed. The rate due on the loan is the primary credit rate, which currently stands at 2.50 percent and fluctuates with the discount rate, the New York Fed said. The term on the subordinated note is the primary credit rate plus 475...

JPMorgan Chase was in talks on Sunday night for a deal that would quintuple its offer for Bear Stearns, the beleaguered investment bank, in an effort to pacify angry Bear shareholders, according to people involved in the negotiations. The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal, struck only a week ago at the behest of the Federal Reserve and Treasury Department. Under the terms being discussed, JPMorgan would pay $10 a share in stock for Bear, up from its initial offer of $2 a share — a figure that represented a...

The weirdness on Wall Street continues. The world’s greatest fire sale has turned into something of a fiasco for JP Morgan, who thought they had Bear Stearns wrapped up in a bow by the Fed at $2 per share. However, the deal has started unraveling thanks to angry BSC shareholders, and JPM now has quintupled its offer to $10 per share: The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal, struck only a week ago at the behest of the Federal Reserve and Treasury Department.Under the terms being discussed, JPMorgan would pay...

Bear Stearns executives sold stock in the firm worth more than $20 million in December, although they remain big shareholders in the beleaguered broker, according to Thomson Financial data. BSC sold 172,621 shares in December worth $15.4 million, while President Alan Schwartz sold 67,900 shares worth just over $6 million, Thomson data show. Alan Greenberg, chairman of Bear's executive committee, sold 99,293 shares worth $8.8 million in December, while Chief Executive Officer Samuel Molinaro sold 27,726 shares worth almost $2.5 million, according to Thomson. Insiders at Bear sold a total of 715,000 shares last year worth more than $75 million,...

March 24, 2008 Loss of liquidity, not insolvency, caused credit crunch Anatole Kaletsky: Economic view Did last week mark the beginning of the end of the credit crunch, or merely the end of the beginning? The answer depends on another question, which was much in the news over the weekend: will the Bank of England and the Federal Reserve start lending against mortgages, essentially without penalty and without limit, as the European Central Bank has done since last year? This may seem an esoteric technical question, but it will determine whether the credit crunch can be resolved merely by tweaking...

J.P. Morgan Chase Co. was in talks on Sunday night for a deal that would quintuple its offer for Bear Stearns Companies Inc., in an effort to pacify angry Bear shareholders... The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal, struck only a week ago at the behest of the Federal Reserve and Treasury Department... Morgan was also in negotiations with the Fed on Sunday night to assume the first $1 billion in losses on Bear assets before the Fed's $30 billion cushion kicks in... Under the new purchase terms being discussed,...

DESPITE THE BEAR STEARNS BAILOUT AND THE FED'S rate cut, a sense of foreboding is still abroad on Wall and Main Streets. Few investors feel good with an economic slowdown gathering force, the dollar in the dumps and contagion threatening to hit financial sectors previously unscathed or not even suspected of being at risk. This in mind, we contacted James Finucane, a 67-year-old stock strategist who now works as a consultant in West Lafayette, Ind., home of Purdue University... ...To him, we're now at yet another extraordinary low, especially with the unprecedented actions taken by the Fed of late to...

We may never know for sure whether the Federal Reserve's rescue of Bear Stearns averted a seizure of the $516 trillion derivatives system, the ultimate Chernobyl for global finance. "If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital. "There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system." All...

<p>WASHINGTON — As Congress and the Bush administration struggle to contain the housing and credit crises — and prevent more Wall Street firms from collapsing as Bear Stearns did — a split is forming over how to strengthen oversight of financial institutions after decades of deregulation.</p>

LIKE Noah building his ark as thunderheads gathered, Bill Gross has spent the last two years anticipating the flood that swamped Bear Stearns about 10 days ago. As manager of the world’s biggest bond fund and custodian of nearly a trillion dollars in assets, Mr. Gross amassed a cash hoard of $50 billion in case trading partners suddenly demanded payment from his firm, Pimco. And every day for the last three weeks he has convened meetings in a war room in Pimco’s headquarters in Newport Beach, Calif., “to make sure the ark doesn’t have any leaks,” Mr. Gross said. “We...

Just when it looked like the financial crisis couldn't get worse, Congressman Henry Waxman, among others, is threatening to mount an investigation into the collapse of Bear Stearns. He is alarmed over the Fed's role in facilitating the liquidation of the investment banking house and delivering its remains to J.P. Morgan Chase. To which we can only say that if Congress wants to find a scandal, the one to look at is the collapse not of Bear Stearns but of the dollar, which in the past seven years has plummeted to less than a 900th of an ounce of gold...