Tim writes:
This thing could go for 40-50 dollars a share. The Fed is paying for it anyways.
Tim | 03.16.08 - 4:22 pm | #

Begbie00 writes:
First!

It always shocks me when bank leaders whine "we had a great business, people just lost confidence in us!".

Um, if you borrow short to lend long and make a spread off the difference, your most important asset IS confidence.
Begbie00 | 03.16.08 - 4:22 pm | #

andy in NZ writes:
I can smell the fear from here!

40 mins, and the NZ markets open. Will be fun to watch. News over the weekend has been grim.
andy in NZ | 03.16.08 - 4:24 pm | #

Ministry of Truth writes:
Shareholders should get nothing until Bear and Sterns is completly assesed at liquidation value. Then if there is anything left the shareholders get a payout. This is really just a bankruptcy anyways.
Ministry of Truth | 03.16.08 - 4:26 pm | #

Yal writes:
BB is going tyo destroy the dollar anyhow by Tuesday. So $50/share on monday is like $30/share on Tuesay.
Yal | 03.16.08 - 4:26 pm | #

blowncue writes:
One assumes the American markets opens tomorrow.
blowncue | 03.16.08 - 4:27 pm | #

lawyerliz writes:
I think I'll go buy some groceries, and fill up the tank tonite.
lawyerliz | 03.16.08 - 4:29 pm | #

Yal writes:
http://www.telegraph.co.uk/money...3/16/ do1601.xml
Yal | 03.16.08 - 4:32 pm | #

jba writes:
Dow Jones story says $20 a share,, and trying to get the deal done before Asian markets open. I doubt NZ really matters so they have until 7:30 I think.
jba | 03.16.08 - 4:34 pm | #

Jim writes:
Gee I wonder if I could short BSC right now at $30 a share. LOL
Jim | 03.16.08 - 4:36 pm | #

Anonymous writes:
Big damn deal there are a several others lined up that are in the same shape as Bear was. There is always more then one cockrach.
Anonymous | 03.16.08 - 4:37 pm | #

Jim writes:
What's holding the sale up? Are they haggling over the price? I'd say anything above $1 a share should be acceptable.
Jim | 03.16.08 - 4:37 pm | #

Ministry of Truth writes:
At $20 a share that would make BSC worth over 2.4 billion dollars. I thought they were done?
Ministry of Truth | 03.16.08 - 4:38 pm | #

safe_as_apartments writes:
Ben & Co. should be thankful this disaster initially happened on a Friday. At least they had the weekend to put this rescue together; imagine if it had happened on a Monday!
safe_as_apartments | 03.16.08 - 4:39 pm | #

Anonymous writes:
Biggest IPO, from Visa, set for next week, trading Wednesday
http://www.sfgate.com/cgi-bin/ar...5/ BU4HVK4MG.DTL

New meat for the bears.
Anonymous | 03.16.08 - 4:41 pm | #

andiron writes:
now now don't change the channel. More writeoffs are coming.

Wall Street investment banks are poised for further pain from loans to private equity groups when they start reporting first-quarter results this week.

From FT
...Goldman Sachs and Morgan Stanley are forecast to write off at least an extra $1bn on their portfolios of loans for leveraged buy-outs, with Lehman Brothers, another provider of buy-out financing, also expected to suffer a big writedown....

did i hear Goldman! I always knew the evil man blackfein was hiding something somewhere..
andiron | 03.16.08 - 4:42 pm | #

ZackAttack writes:
So, the urgency to get this announced before the major Asia markets open is to forestall a run on the dollar?

Or just a general effort to prop markets up?
ZackAttack | 03.16.08 - 4:44 pm | #

andy in NZ writes:
I doubt NZ really matters so they have until 7:30 I think.

Harsh, matters to 4 million sheep shaggers :)
andy in NZ | 03.16.08 - 4:45 pm | #

TulsaTime writes:
Great quote 'I'm not at all certain how you put the defibrillators on and jumpstart the company again.', this from the end of thestory on Bloomburg.

Everything I've read says they have to put out the best story they can and hope it sticks. There are too many exceptions to have a real sale this quickly, but outright nationalization is probably on W's no-no list.
TulsaTime | 03.16.08 - 4:45 pm | #

Owner Earnings writes:
The purchase price will be backstopped by the Fed.
Owner Earnings | Homepage | 03.16.08 - 4:47 pm | #

Anon writes:
What clients at Bear Stearns are left to be contacted?

(I'm serious)

IMO
Anon | 03.16.08 - 4:47 pm | #

ZackAttack writes:
Why on earth, short of having a gun put to your head, would you want to expose yourself to their book of L3 assets?
ZackAttack | 03.16.08 - 4:47 pm | #

mp writes:
Goldman to reveal $3 billion hit

http://www.telegraph.co.uk/money...6/ cngold116.xml
mp | 03.16.08 - 4:47 pm | #

FFDIC writes:
Here is the WSJ's piece on it.
Bear Stearns Closes in on Deal To Sell Itself to J.P. Morgan
(Lehman probably feels like Estelle Riener in the movie 'When Harry Met Sally' - during Meg Ryan's faux orgasm scene - older customer Estelle says to the diner's waiter, "I'll have what she's having.")

http://online.wsj.com/article/ SB...d=djemalertNEWS
FFDIC | 03.16.08 - 4:49 pm | #

FFDIC writes:
Tim, as a taxpayer on the hook for this thang I bid $19.95.
FFDIC | 03.16.08 - 4:50 pm | #

iceman writes:
I'm not sure that a sub-$20 price will limit the panic over Bear. I mean, this puppy was $150 last summer.
iceman | 03.16.08 - 4:57 pm | #

Anonymous writes:
Zimbabweans have reacted to the shock of waking up to a new raft of price rises.

Just before the weekend, prices for most basic goods and transport doubled.

A quart of beer is now selling at Z$50 million, up from Z$20 million.

Soft drinks that were Z$7.5 million are now Z$25 million.

Bus fares into Harare city centre from the outer suburbs went up to Z$10 million from Z$5 million.

This week, Robert Mugabe granted public servants large pay rises to keep up with inflation.

They were awarded a 750% pay raise, which Robert Mugabe said they “should be happy with”.

http://feeds.bignewsnetwork.com/...com/? sid=337910

Coming to the US soon, It can hapen here!
Anonymous | 03.16.08 - 5:00 pm | #

risk capital writes:
http://biz.yahoo.com/rb/080316/b...eover.html? .v=3
risk capital | 03.16.08 - 5:01 pm | #

12th Percentile writes:
Didn't the CEO say this week he thought they should be valued at $80 per?

With valuation skills like that it is no wonder he destroyed a company.
12th Percentile | 03.16.08 - 5:01 pm | #

DonKei writes:
The United States believes that a strong dollar is in our best interests.

The U.S. government does not guarantee the debts of its GSE's.

Bear Stearns is not a GSE, so we aren't bailing out one of them (which we'd never do) and this bailout won't impact our policy of protecting the greenback.

Nothing to see here. Move along.
DonKei | Homepage | 03.16.08 - 5:02 pm | #

philip v. writes:
What happens to level 3 assets in a sale?Don't they get marked to market. Does the fed do a deal with JP Morgan to hide these losses?I have a feeling the Ministry of Propaganda will try to spin this as a wonderful rescue plan to gas the S&P's.There seemed to be a big buyer/manipulation taking place around 391 on the S$P's Friday.Did anyone else feel that?Who will be the nexr Bear Stearns?
philip v. | 03.16.08 - 5:06 pm | #

blowncue writes:
Epicurean Dealmaker had a great post last year entitled Grains of Sand:

http://epicureandealmaker.blogsp...? q=phase+change


"The archetypical analogy used to think of such systems is the pile of sand (or rice), as Mark Buchanan describes in his book "Ubiquity: Why Catastrophes Happen." Back in 1987, three physicists at Brookhaven National Laboratory began to investigate nonequilibrium systems by using computer simulations of avalanches in sandpiles:"

The results:

"... Bak and his colleagues next played a trick with their computer. Imagine peering down on the pile from above, and coloring it in according to its steepness. Where it is relatively flat and stable, color it green; where steep and, in avalanche terms, "ready to go," color it red. What do you see? They found that at the outset the pile looked mostly green, but that, as the pile grew, the green became infiltrated with ever more red. With more grains, the scattering of red danger spots grew until a dense skeleton of instability ran through the pile. Here then was a clue to its peculiar behavior: a grain falling on a red spot can, by dominolike action, cause sliding at other nearby red spots. If the red network was sparse, and all the trouble spots were well isolated from each other, then a single grain could have only limited repercussions. But when the red spots come to riddle the pile, the consequences of the next grain become fiendishly unpredictable. It might trigger only a few tumblings, or it might instead set off a cataclysmic chain reaction involving millions. The sandpile seemed to have configured itself into a hypersensitive and peculiarly unstable condition in which the next falling grain could trigger a response of any size whatsoever."
blowncue | 03.16.08 - 5:09 pm | #

andy in NZ writes:
woot.

NZX down 1% in first 5 mins of trading.
andy in NZ | 03.16.08 - 5:12 pm | #

plschwartz writes:
If the BSC bailout costs the entire 2.4 bil, I think it is money well spent considering the alternatives.
But does this sale if it goes through means that Morgan will take on the risk of SC investments or is that separately guaranteed by the FED?
plschwartz | 03.16.08 - 5:14 pm | #

Anthony writes:
This must be the quickest due diligence ever performed!!!!!
Anthony | 03.16.08 - 5:14 pm | #

FFDIC writes:
Telegraph UK
Goldman Sachs to reveal $3bn hit. "The bank's $3bn writedown will be based partly on the declining value of its 4.9 percent stake in Industrial & Comm Bank of China which is held separately on Goldman's balance sheet."
http://www.telegraph.co.uk/money...6/ cngold116.xml
FFDIC | 03.16.08 - 5:20 pm | #

Jill writes:
ZackAttack writes: "Why on earth, short of having a gun put to your head, would you want to expose yourself to their book of L3 assets?"

-- Nail on the head, er, I mean, the gun. JPMC will get a "deal" done, but without shareholder approval, it's just an interim one (or something). They could still walk later.

12th Percentile writes: "Didn't the CEO say this week he thought they should be valued at $80 per? With valuation skills like that it is no wonder he destroyed a company."

-- Don't forget they "valued" all of that bundled subprime crap, but they'd never overvalue it, because they are honorable bankers.
Jill | 03.16.08 - 5:20 pm | #

mp writes:
The Fed, meaning the US taxpayer, will take the junk.
mp | 03.16.08 - 5:21 pm | #

Yalt writes:
Anthony writes:
This must be the quickest due diligence ever performed!!!!!

There'll be time for the due diligence later...what's important now is putting together (1) an agreement that will allow for easy renegotiation (or outright cancellation) and (2) a press release that will divert everyone's attention away from (1).

The actual deal, if any, is secondary. What matters now is the immediate announcement of a deal.
Yalt | 03.16.08 - 5:24 pm | #

Jill writes:
What Yalt said.
Jill | 03.16.08 - 5:26 pm | #

steelhead writes:
Andy in NZ:

Good for you. Defend that Kiwi honor.
steelhead | 03.16.08 - 5:27 pm | #

rich writes:
>What's holding the sale up? Are they haggling over the price? I'd say anything above $1 a share should be acceptable.

I'll bet they are haggling over how much of the CDS liabilities MS has and how much the Fed takes on.

Would anybody be so concerned about Bear going down if it wasn't for swaps? And if their swap positions were close to neutral, would anybody care?

The swaps weren't marked to market. And they are under water. I'll bet.
rich | 03.16.08 - 5:27 pm | #

sam writes:
this is scary.....

http://www.europac.net/Schiff-FB...-3-14- 08_lg.asp
sam | 03.16.08 - 5:30 pm | #

mp writes:
"I'll bet they are haggling over how much of the CDS liabilities MS has and how much the Fed takes on."

Yup. They're not arguing about the value of the office equipment, or the building.
mp | 03.16.08 - 5:30 pm | #

quartz writes:
Since Bear Sterns seems destined to cease existing in the near future, I think we can safely say that the Fed is not so much bailing out Bear as bailing out Bears creditors and customers. It appears the the money Bear borrows will pay back short term creditors (and pay off account holders) when they otherwise would get the assets of questionable value that the Fed now takes instead.
quartz | 03.16.08 - 5:31 pm | #

mp writes:
Quartz, Bear Stearns died Friday.

This is the autopsy.
mp | 03.16.08 - 5:32 pm | #

Anonymous writes:
"I'll bet they are haggling over how much of the CDS liabilities MS has and how much the Fed takes on"

Nope how much the CEO golden parachute is going to be.
Anonymous | 03.16.08 - 5:32 pm | #

risk capital writes:
rich-

are you just ignorant or do you know that jp morgan and morgan stanley are two different firms?

That is the second time you referred to morgan stanley being involved.
risk capital | 03.16.08 - 5:33 pm | #

mp writes:
"Nope how much the CEO golden parachute is going to be."

That's kind of the incentive payment for doing the deal before the market opens tomorrow, isn't it?
mp | 03.16.08 - 5:34 pm | #

rich writes:
Probably, MS in the most likely buyer because they are the most exposed counterparty to BS swaps. They have the most to lose from counterparty default.

So, they might be haggling over whether or not the Fed will back the counterparty risk hit that MS would have felt if Bear went down.

Fed: You would have lost a lot of money if BS defaulted.

MS: Yeah, but so would everybody else. And we're bailing out everybody else.

But it really doesn't matter. It's all about splitting up the watermelon of losses and liabilities under intense time pressure. The world's biggest poker game. A few seconds of mental lapse can cost you billions. A smart bluff can save you billions.
rich | 03.16.08 - 5:34 pm | #

Anonymous writes:
The U.S. Federal Reserve must start buying or borrowing mortgage-related securities from banks and brokers to forestall an economic disaster, said Brian Barish, who helps manage $8 billion at Cambiar Investors LLC.

``The Great Depression was caused by a failure by the Fed to respond to a crisis of somewhat similar character,'' Barish, president of Denver-based Cambiar, said in an interview yesterday. `` All sorts of omens popping -is that really his last name? Come on that's a joke right.
Anonymous | 03.16.08 - 5:35 pm | #

Anonymous writes:
That's kind of the incentive payment for doing the deal before the market opens tomorrow, isn't it?

All these bastards are a bunch of crooks and this is how everyone of these deals goes down.
Anonymous | 03.16.08 - 5:35 pm | #

rich writes:
Excuse my ignorance.
rich | 03.16.08 - 5:35 pm | #

Jill writes:
Bear Stearns, JPMorgan Strive for Sale, People Say

"You'd have to assume they're not extending the loan to be good guys," said David Castillo, a senior managing director at Further Lane Securities in San Francisco, referring to JPMorgan's bailout of Bear Stearns. "They're extending the loan to take a look at the books."

:
Jill | 03.16.08 - 5:37 pm | #

acaum writes:
"The U.S. Federal Reserve must start buying or borrowing mortgage-related securities from banks and brokers to forestall an economic disaster"

Does anyone here have any doubt that this is the inevitable end game to this monstrous maelstrom of fear, greed, and hubris? And how can we make some money from it if it is?
acaum | 03.16.08 - 5:39 pm | #

Octavio Richetta writes:
blowncue writes:
Epicurean Dealmaker had a great post last year entitled Grains of Sand

Why do you need the fancy simulation example? What is going on now is a better example: it is already happening and no computer simulation is involved*

*I used to write stochastic simulations for a living and I know what goes behind the models so I don't get terribly exited about people trying to make a case via simulation.
Octavio Richetta | 03.16.08 - 5:41 pm | #

njdoc writes:
The real question, as others have mentioned, is not the equity price, it's the debt. What happens to Bears liabilities? Will they be marked to market or sent to pasture in the Fed?
njdoc | Homepage | 03.16.08 - 5:41 pm | #

ZIRP-USA writes:
My question is how the Fed bails out the combined JPM BSC entity when that is ultimately necessary. The US economy is $14 trillion in size.....BSC's derivatives sh*tpile is $14.3 trillion. Who will be the first to say we ran out of money?

Anyways, with a 52 percent chance at a 100bp cut on Tuesday, does anyone disagree with a ZIRP in the USA soon?
ZIRP-USA | 03.16.08 - 5:42 pm | #

NorkaWest writes:
Bear Stearns was one of the larger prime brokers.

If they go down, it could take a lot of hedge funds with it.

I suspect that much of the "run on the bank" last week was hedge funds moving their assets to somewhere the funds hoped was safer. Even if if a fund has no margin debt and the securities are SIPC insured, you are facing operational uncertainty until the mess is sorted out. The Drexell Burnham bankruptcy was a serious pain to live through, even though our securities were at a bank custody department that settled delivery-versus-payment.
NorkaWest | 03.16.08 - 5:42 pm | #

mp writes:
"And how can we make some money from it if it is?"

You wait for the smoke to clear and, if you're still standing, start moving.

Kind of like buying C at $9 during the last fiasco.
mp | 03.16.08 - 5:43 pm | #

Jill writes:
According to WSJ, we'll know soon enough. If the deal flops, BS will probably file for BK before Asia opens.
Jill | 03.16.08 - 5:43 pm | #

FFDIC writes:
NY Times - Bear Stearns Racing Toward Selling Itself to JPMorgan
http://www.nytimes.com/2008/03/1...&hp& oref=slogin
FFDIC | 03.16.08 - 5:44 pm | #

sam writes:
http://online.wsj.com/article/ SB...d=djemalertNEWS
sam | 03.16.08 - 5:45 pm | #

wawawa writes:
Kind of like buying C at $9 during the last fiasco

I like to buy Wells Fargo below $15. it pays good divident.
wawawa | Homepage | 03.16.08 - 5:46 pm | #

Yalt writes:
ZIRP-USA writes:
The US economy is $14 trillion in size.....BSC's derivatives sh*tpile is $14.3 trillion. Who will be the first to say we ran out of money?

Using the total notional value of the derivatives book as an estimate of the likely loss is a bit of a stretch, to say the least...it's like evaluating an insurance company by assuming that every single policy on their book will have a limit loss. No matter how badly you underwrite, that doesn't happen.
Yalt | 03.16.08 - 5:48 pm | #

acaum writes:
If the treasury or the Fed were to start buying securities how would they do it?
acaum | 03.16.08 - 5:50 pm | #

sam writes:
UBS is in the thick of it again

http://www.marketwatch.com/news/...& siteid=yahoomy
sam | 03.16.08 - 5:50 pm | #

TradingStats writes:
At what price are you guys bidding for PJM Monday morning...
My already entered order is 29.75 for 25k
TradingStats | 03.16.08 - 5:51 pm | #

TradingStats writes:
jpm , that is
TradingStats | 03.16.08 - 5:51 pm | #

mp writes:
"If the treasury or the Fed were to start buying securities how would they do it?"

They wouldn't buy them, per se, but would accept them as collateral on a loan with no recourse.
mp | 03.16.08 - 5:53 pm | #

Anonymous writes:
At what price are you guys bidding for PJM Monday morning...

Gap in the chart @ 16.35
Anonymous | 03.16.08 - 5:54 pm | #

acaum writes:
"They wouldn't buy them, per se, but would accept them as collateral on a loan with no recourse."


Does this not bring on a whole new set of unintended consequences? They have to get the money from somewhere to lend it out.
acaum | 03.16.08 - 5:55 pm | #

Kett82 writes:
Lehman is waiting in line
Goldman Sachs to reveal $3bln hit
Paulson on TV
With words of reassurance


No matter what one does, whether one's deeds serve virtue or vice, nothing lacks importance. All actions bear a kind of fruit. - Buddha
Kett82 | 03.16.08 - 5:56 pm | #

mp writes:
"They have to get the money from somewhere to lend it out."

Ultimately, the money will come from you and me, US taxpayers.
mp | 03.16.08 - 5:57 pm | #

ZackAttack writes:
It'd be nothing but a blind swing of the pinata to bid on that thing.

I'd play where I had at least some semblance of an edge instead.
ZackAttack | 03.16.08 - 5:58 pm | #

TradingStats writes:
i've lost more money/opportunity to make, looking at Gap theory...
TradingStats | 03.16.08 - 5:59 pm | #

zig writes:
post from rge monitor

Creating Value or Stealing Value?

Money, whether it’s gold, wampum, seashells or dollars, is an exchange medium for the product of the country’s capital, labor and resources. Nothing else. The U.S dollar got its reputation for soundness when the value of its capital was backed by the constancy of precious metals. Now, with fiat bucks, that backing rests solely on Ben’s private printing press and political and financial favoritism. In the end, without value, i.e. people going to work every day, producing, investing and servicing, Ben is only printing on paper.

It is said that bankers create money for themselves out of thin air. But floating in that thin air of M3 is the sum value of all the resources of every single American. A bailout for Bear Stearns or Lehman, or the steady stream of inflated Fed billions slipped under the table -- from keyboard to keyboard -- isn’t creating money. It’s stealing money, assets. Yours and mine.

The press spins the Fed’s actions with concepts such as that used by the Wall Street Journal in a recent top head: “Fed Races to Rescue Bear Stearns in Bid to Steady Financial System.” Closer to the truth would have been: “In broad daylight, the private bankers running your government slipped a few more dollars out of your account. The money is needed as security for the money mountain the bankers are building from the looting of your accounts.”

Why this daring daytime burglary? Well, it’s the same old saw that, sad as it is, the failure of one Big Guy results in great damage to the economy and hardship for the people. The truth is, however, that a corrupt friend of the bankers was in danger of loosing his stash, and a few secret banker pals had a stake in his ill-gotten gains. And another pal, as a buyer, saw a golden opportunity.

How tragic that the same financial fraternity that created America’s financial problems is in full charge of the rescue.

If the country’s financial system eventually does collapse, it will not be because Bear Stearns failed. It will be because a private banking cartel working out of greed created fiat out of nothing until its backing, i.e., the transfer in between of what you earned, dropped to nothing. Fiat paper with no backing equals “nothing.”
zig | 03.16.08 - 6:01 pm | #

NorkaWest writes:
All you guys who have been talking about your trading schemes on this board should double check who is clearing your trades.

BEST is one of the larger clearing firms for small brokerages.

Your accounts could be frozen until they sort the mess out, if BEST goes BK.
NorkaWest | 03.16.08 - 6:01 pm | #

Jill writes:
The Fed has approx. $850 Billion in reserves and has "spent" approx. $400 Billion. When the pot's empty, they ask Congress for authority to print more. Right?
Jill | 03.16.08 - 6:01 pm | #

piter writes:
One has to think, even if this purchase does go through, changing the name of the company on the front door doesn't do a whole lot to change the ugly situation inside the building.

I can't see how JPM is going to pull this off without destroying itself. Talk about a Faustian bargain...
piter | 03.16.08 - 6:02 pm | #

Jill writes:
What piter said.
Jill | 03.16.08 - 6:04 pm | #

Jill writes:
Recalling that Anderson killed itself in order to shield Enron. Lots of powerful pressures out there.
Jill | 03.16.08 - 6:05 pm | #

me writes:
I have a question that has been bugging me about this whole situation and I would really appreciate a good answer so I can know if my thinking is wrong. Why would you issue money to the banks to help them when it is the consumer that need help. If consumption is 70% of the macro economic equation why would you help the 30% (generalizations)? It seems if you want to move the economy you let money come in from the consumer to the banks and filter up and circulate because there is blockage going on as long as the banks get the money there is blockage and that blockage is going to prevent this econony from moving forward. I mean doesn't that make sense? I am new to this I know a little about economics but I think I know enough that what they are doing is not going to move the economy.
me | 03.16.08 - 6:05 pm | #

Jack Staub writes:
Jim writes:
"What's holding the sale up? Are they haggling over the price? I'd say anything above $1 a share should be acceptable."

Bear could have negative value if JPM buys it whole and takes on the liabilities associated with Bear's VIEs, CDOs, MBSs, and CDSs!
Jack Staub | 03.16.08 - 6:06 pm | #

Jill writes:
me: Of course, you make sense, but the rich see things differently.
Jill | 03.16.08 - 6:06 pm | #

Keep It Simple, I'm Stupid writes:
If the Fed assumes any risk, and the amount JPM pays for Bear is anything over $0, I'm going to be angry. Once the shareholders are wiped out, my attitude towards Fed intervention changes. Before then, no.
Keep It Simple, I'm Stupid | Homepage | 03.16.08 - 6:07 pm | #

Jill writes:
According to reports, they're talking $15-$20 if the deal goes through. Time will tell.
Jill | 03.16.08 - 6:09 pm | #

Octavio Richetta writes:
Wheee! Visitor count keeps creeping up: 292
Octavio Richetta | 03.16.08 - 6:10 pm | #

NorkaWest writes:
Sorry long post.

This from the BEST website:

BSSC is a broker dealer registered with, and fully regulated by, the SEC. In compliance with the SEC rules and regulations for the protection of customers, BSSC does not pledge or lend its Customers' Fully Paid and Excess Margin securities. BSSC maintains such securities in its possession or in a location that has the controls required by the SEC to protect such securities from claims of third parties, in conformity with the SEC rules. Based upon a formula prescribed in the SEC's rules, net Customer Free Credit Balances (if any), or the equivalent thereof in Qualified Securities, not required to be used for the settlement of Customer transactions or the financing of Customer margin debt are held by BSSC in an account segregated for, in the words of the SEC rules, "the exclusive benefit of Customers". As a result, such funds and Qualified Securities are not available for BSSC's proprietary use. Compliance with SEC and similar rules is regularly reviewed by the regulatory agencies that are charged with their enforcement.

Membership in SIPC and a Private Surety Provide Protection for Customers' Accounts
(As used in the discussion in this section of SIPA and SIPC, "Customer" and each other defined term has the meaning assigned to it under SIPA.)

BSSC is a member of SIPC, which was created by Congress to protect Customers of securities brokers and dealers and to promote public confidence in the securities markets in the United States. Customers of a member of SIPC that fails financially are afforded special benefits under SIPA. These special benefits provided under SIPA are relevant only if the broker-dealer that carries a Customer's account fails and is liquidated under SIPA.

Although there can be no assurance of what would occur in any specific situation if a member of SIPC were to fail, in a liquidation under SIPA, Customer accounts of a failed firm are intended to be transferred to another SIPC member firm. If that were to occur, the transfer would usually occur within a week of the failure. If their accounts are transferred, Customers may deal with their accounts after their transfer in the same manner as if their original broker-dealer had not failed.

If a Customer's accounts are not transferred to another SIPC member firm, such Customer is entitled to receive the cash and securities in its accounts, minus any obligations the Customer owes to the failed broker-dealer. If there were not enough cash and securities to make distributions in full to all Customers, each Customer would receive a distribution, on a pro rata basis, of Customer Property held by the failed broker-dealer to the extent of the Net Equity that was in such Customer's accounts, determined as of the date of the filing of the petition with respect to the SIPC member. Customers are not considered general creditors of a failed broker-dealer, and receive distributions from Customer Property ahead of general creditors. General creditors of the failed broker-dealer do not receive any Customer Property unless all Customers are first satisfied in full.

If the distributions from Customer Property are not sufficient to satisfy Customers' claims for the Net Equity in their accounts, SIPC protection would be available to satisfy Customer claims for any remaining shortfall in their Net Equity, up to $500,000 per Customer (of which up to $100,000 may be for cash claims).

In addition to the coverage provided by SIPC, BSSC has obtained a surety bond (the "Excess SIPC Bond"). The Excess SIPC Bond covers the amount of each Customer's claim for securities and cash not satisfied by distributions of Customer Property and SIPC advances. The Excess SIPC Bond is issued by CAPCO, which enjoys a Financial Strength Rating of A+ from Standard & Poor's with a stable outlook. Accordingly, the entire Net Equity of each of BSSC's SIPA-protected Customers is protected against the loss of cash and/or securities from its accounts in the unlikely event of a liquidation of BSSC under SIPA.

The coverage described above covers losses of cash or securities from Customer accounts at BSSC if it were to fail and be unable to meet its obligations to its Customers. The coverage does not cover any losses from changes in the market value of investments after a liquidation commences, from delays in the liquidation process, losses of assets not eligible for SIPC protection (such as futures, options on futures, foreign exchange transactions, commodity contracts, precious metals contracts, or any investment contracts that are not registered as securities) or losses incurred by persons that are not "Customers" under SIPA. Although created by Congress, SIPC is not a government agency. It is a non-profit membership corporation which receives its revenue from those brokers and dealers that are required by law to be SIPC members and from its own investments.

A bank or brokerage firm that is a Customer and that is acting for its own trading account is entitled to participate in the preferential distribution of customer property in a SIPA liquidation, but it is not eligible for SIPC advances if there is a shortfall in such a liquidation. However, the Excess SIPC Bond would provide coverage for such entities, without any deduction for the unavailable SIPC advances.

We hope that this summary has been useful. These matters are complex and it is not possible to address all issues in a very general summary such as this one. Should you have any questions regarding SIPC coverage, please consult your own legal counsel, or visit the SIPC website at www.sipc.org.

a brother writes:
me, yo MF! Yo need yo comedy show on daz HBO like Mo'Nique dat filthy biiiiitch...get figgy wit it my man.
a brother | 03.16.08 - 6:11 pm | #

scotty_at_the_helm writes:
My two cents,

S&P500 is between 5 and 8% overvalued, by my Super Amazing Fed Model, but Bear fair value is priced almost to perfection now @ $30, more like $28.50.

However, if the market gets spooked, fair value for Bear will go a little lower, but it all depends on level 3 casino chips and misc bad bets..
scotty_at_the_helm | 03.16.08 - 6:12 pm | #

mp writes:
me, the Fed gets money to you, the consumer, through the banking system.

The banking system has gone perversely haywire because, even though the Fed is lending enormous amounts of money to the banks, they don't want to lend it.

The Fed must break the deadlock by restoring faith in the system, and the way they're doing that is by bailing out the deadbeats, but trying to do it in such a way that it appears that they're not.

Simple explanation, fraught with difficulty, but there it is.
mp | 03.16.08 - 6:12 pm | #

crispy&cole writes:
$15-20 means it will open up at $10-12, then the arbs will take over. This deal will never get done. Between the lawsuits and lack of trading... BSC is toast either way.
crispy&cole | Homepage | 03.16.08 - 6:14 pm | #

TulsaTime writes:
Hey Me- They try to claim that they are protecting the support mechanism with the bail-outs. That the failure of the banking mechanism would be catastrophic to the economy. And it would be if the failure of Bear led there. The reality is that the damage would hit the upper end financials mostly, while retail would either be bypassed or figure a way to muddle through.
TulsaTime | 03.16.08 - 6:14 pm | #

Sebastian writes:
me asked: "Why would you issue money to the banks to help them when it is the consumer that need help. If consumption is 70% of the macro economic equation why would you help the 30% (generalizations)?..."

Banks fund (loan money to) businesses and consumers both. They also provide utility-like services that a modern economy can't do without.

One other semi-OT point: Regardless of where an economy is in a business cycle, the 70% consumption part stays relatively stable (since, no matter what, you still need food, a place to live, water and power, etc.). It's the much-smaller business part where the real growth comes from.


Sebastian
Sebastian | 03.16.08 - 6:15 pm | #

Jill writes:
If the deal flops, does the market open tomorrow?
Jill | 03.16.08 - 6:15 pm | #

Octavio Richetta writes:
S&P500 is between 5 and 8% overvalued, by my Super Amazing Fed Model, but Bear fair value is priced almost to perfection now @ $30, more like $28

Gee! where can I buy me a copy of ya great model? Bet you've made tons of money with it!
Octavio Richetta | 03.16.08 - 6:16 pm | #

justintime writes:
Foreign nationals flew jets into buildings and not one government official lost his job for their lack of oversight. Just where was the FBI and the CIA, on a picnic?? The smartest economical minds in the treasury and the federal reserve watched all of this developing and now blowing up and there will be no one held accountable. Can Alan Greenspan be tried for treason? There were many on the street that even before Professor R. was preaching the hard landing knew this would not end well. When do people pay for their mistakes. We are truly screwed again.
justintime | 03.16.08 - 6:17 pm | #

Ray writes:
While everyone is waiting on the news, I wonder if anyone knows if an individual investor can end up with BSC, LEH, or any of the financial institutes as a counterparty? For example, if I bought some puts or calls through a regular broker (say, TD Ameritrade), and the option writer goes under. What happens?
Ray | 03.16.08 - 6:17 pm | #

NorkaWest writes:
Screw the price. Settle the sale!!

If BEST goes down, a major portion of the securities industry's infrastructure will be out of action.

Things will be FUBAR until things get sorted out.

Stop playing chicken.

Settle the damn sale!!
NorkaWest | 03.16.08 - 6:17 pm | #

TradingStats writes:
occ covers you , ray
TradingStats | 03.16.08 - 6:18 pm | #

Luv Guv, A. Greenspan & T. Bla writes:
There are other people out there that would make a far better Fed chairman.
Luv Guv, A. Greenspan & T. Bla | 03.16.08 - 6:19 pm | #

acaum writes:
299 Visitors Online

Never seen this before at this time on a sunday.
acaum | 03.16.08 - 6:19 pm | #

NorkaWest writes:
Ray:

I believe that the counterparty to exchange traded options is the exchange's clearing corporation.
NorkaWest | 03.16.08 - 6:20 pm | #

TradingStats writes:
http://www.theocc.com/initiative...ves/ council.jsp
TradingStats | 03.16.08 - 6:21 pm | #

Octavio Richetta writes:
justintime | 03.16.08 - 6:17 pm

great comment. Most people in the world are quite mediocre; Never mind government officials... Look at our president
Octavio Richetta | 03.16.08 - 6:21 pm | #

Kicker writes:
They wouldn't buy them, per se, but would accept them as collateral on a loan with no recourse.


No recourse loans would allow the Federal Reserve to pick and choose the survivors. It would almost guarantee a run to the "blessed" banks from the less fortunate.

A non-recourse loan would also come with a free call option on the security. If it recovered par value the bank could always pay back the loan, recover the securities and pocket the profit. If it doesn't, oh-well, it's non-recourse. Privatize gains, socialize losss at its finest.

The free call option would be a not-so-discreet subsidy of the bank involved.

I'm already getting pissed just thinking about it. I'm guessing they couldn't do this "under the covers".

I'd bet on an open market purchase of securities after an emergency vote of the FOMC. There at least some framework for doing such in it's charter. But, I'd bet we'll see RTC version II before we'd see direct monetization.
Kicker | 03.16.08 - 6:21 pm | #

mp writes:
"If the deal flops, does the market open tomorrow?"

Yes, because to do otherwise would be an admission to God and everybody that the system has melted down.

Even Joe Sixpack would figure that out, and you definitely don't want Joe to figure it out.
mp | 03.16.08 - 6:21 pm | #

Octavio Richetta writes:
308, 311, ...
Octavio Richetta | 03.16.08 - 6:22 pm | #

squeezed writes:
314
squeezed | 03.16.08 - 6:22 pm | #

Jill writes:
acaum writes: "299 Visitors Online. Never seen this before at this time on a sunday."

-- We be interested in this meltdown thingie.

:
Jill | 03.16.08 - 6:22 pm | #

NorkaWest writes:
314 and counting
NorkaWest | 03.16.08 - 6:22 pm | #

piter writes:
I feel like I'm just watching the Titanic waiting for it to sink... one of the stranger days of my life.
piter | 03.16.08 - 6:23 pm | #

FFDIC writes:
justintime, that reminds me to report that worthless former FDIC chairman & big Bushie, Donald Powell, resigned from his Katrina/New Orleans role recently. U.S. Senator Mary Landrieu (D- Louisiana) was quoted as saying that Powell had been the wrong man for the job. Ditto: FDIC
FFDIC | 03.16.08 - 6:24 pm | #

TulsaTime writes:
Emergency morning rate cut anybody????
TulsaTime | 03.16.08 - 6:25 pm | #

N writes:
Me: The "filtering up" that you refer to is exactly what FDR did with the various New Deal legislation -- e.g. the WPA and the National Labor Relations Act -- it allowed us commoners access to productive capital.
N | Homepage | 03.16.08 - 6:25 pm | #

Jill writes:
Gotta love that Titanic analogy, but not enough lifeboats!!
Jill | 03.16.08 - 6:25 pm | #

Andrew Foland writes:
Presumably, BSC's clearinghouse servers will be trying to deal with about $14T of orders to close positions tomorrow.

How much does it normally handle?

And purely out of curiosity...how does one close a position of valuable-but-out-of-the-money options when the counterparty is poison? and everyone else has left the building? I mean, what exactly do you do?
Andrew Foland | Homepage | 03.16.08 - 6:26 pm | #

scotty_at_the_helm writes:
Octavio,

Complex stuff!

take the p/e and invert to e/p, the earnings yield, then add in div yield as percent, which gives yah the total yield -- then get your 10 year treasury yield and see if the sucker is selling at discount or premium.. greenspan and i used to smoke hash and bullshit over this....
scotty_at_the_helm | 03.16.08 - 6:26 pm | #

John Stark writes:
Bloomberg provides a nice bit of historical perspective on federal interventions in the marketplace:

http://www.bloomberg.com/apps/ ne...id=acAqXkb6aIJM
John Stark | 03.16.08 - 6:26 pm | #

FFDIC writes:
mp,it might help if conjure repents.
FFDIC | 03.16.08 - 6:26 pm | #

Dickeylee writes:
AG just weighed in, you can't predict a bubble, and you can't pop them early, 'cause CEO's wouldn't get fair value out of their options, so it wasn't his fault! Sorry, don't know how to link, but Toma has it up at his sight.

Economist's View

CR links to it down the left border, go read it for yourself.
Bank Holiday, anyone?
Dickeylee | 03.16.08 - 6:26 pm | #

Jill writes:
Anybody around when Drexel went under? Enlighten us, please!
Jill | 03.16.08 - 6:27 pm | #

Larster writes:
Emergency rate cut?

I do not see how the Fed cuts rates this week as the dollar will surely tank tomorrow. You would have to be as dumb as Clay Bennett paying 350 mil for the Sonics to move it to some small mkt. Wait a minute- Clay's backers are all right wing nuts. anything can happen!
Larster | 03.16.08 - 6:29 pm | #

FiveAcres writes:
Ok. I've been hanging around here for a while, and am still clueless about what "conjure bag" means here. Anyone care to enlighten me?
FiveAcres | 03.16.08 - 6:29 pm | #

squeezed writes:
Emergency morning rate cut anybody????

Pissing in the wind.
squeezed | 03.16.08 - 6:29 pm | #

Dickeylee writes:
Sorry, Thoma. I should've got it right the first time!
Dickeylee | 03.16.08 - 6:29 pm | #

scotty_at_the_helm writes:
ok, lets do a practice run


market down 14%,

no, up 30, no down 10, about even, plunge!!!!!
scotty_at_the_helm | 03.16.08 - 6:30 pm | #

Paul writes:
Now we have the answer from Sir Allan. It's not morality, religion, or politics that caused this mess. It's not even greed or stupidity.

I was the models - they screwed up.

The essential problem is that our models – both risk models and econometric models – as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality.


http://www.ft.com/cms/s/0/ edbdbc...00779fd2ac.html
Paul | 03.16.08 - 6:30 pm | #

TulsaTime writes:
Ya can't model GREED!!!!
TulsaTime | 03.16.08 - 6:32 pm | #

Octavio Richetta writes:
Real time metals and currencies. get yourself the Java applet, it is worth. Euro 1.57, gold 1004, Yen 98 Ouch!

http://www.usagold.com/live.html
Octavio Richetta | 03.16.08 - 6:32 pm | #

Don writes:
http://bloomberg.com/apps/news? p...id=aIGRziUnaXjE

Banks doing "Jingle Contracts"
Real estate developer John Wimmer paid Citigroup Global Markets Realty Corp. almost $1 million last year to lock in a 5.6 percent mortgage rate on the refinancing of six commercial properties.

At the November closings, Citigroup, citing plummeting demand for mortgage bonds, boosted the rate to 7.123 percent.

``I was very upset,'' Wimmer said in a phone interview from his office in Hales Corners, Wisconsin. ``We had many proposals to lock the rate with other financial institutions and we picked Citigroup because of their reputation and strength."
Don | Homepage | 03.16.08 - 6:33 pm | #

acaum writes:
Kicker | 03.16.08 - 6:21 pm |

So what happens to the market, economy, consumer, foreign investors, inflation, treasuries, etc. after this occurs.

Not trying to be pedantic but still just thinking about how to make some money out of the, as I see it, inevitable guvmint bailout. What happens after that? More of the same, global reset, what?
acaum | 03.16.08 - 6:33 pm | #

John Stark writes:
It always shocks me when bank leaders whine "we had a great business, people just lost confidence in us!".

Even funnier are the Ponzi guys who whine, "We woulda been fine if those guys from the SEC hadn't butted in" or
"We were getting things worked out, but then the AG filed that cease and desist order."
John Stark | 03.16.08 - 6:33 pm | #

Michael writes:
Dear God,
Please let JP Morgan be colossal knife catcher. I've been wanting to see them take it in the juggler since the last depression.
Michael | 03.16.08 - 6:35 pm | #

Kett82 writes:
Dear Paul

About your link...all I can say...

Mr. Greenspan...have you no shame!
Kett82 | 03.16.08 - 6:36 pm | #

mp writes:
FiveAcres, Conjure Bag is my little, furry, friend who knows a few things about the stock market.
mp | 03.16.08 - 6:38 pm | #

Octavio Richetta writes:
345... Don't get to exited. Teflon market may open just 0.000001% down.... And move up on the slightest bogus positive news crossing the wires... I have seen it happen so man times I would not be surprised to see it happen again. Paulson and Benny get on CNBC early with plenty of makeup and promise a bunch of stuff that scares the shorties:-)
Octavio Richetta | 03.16.08 - 6:39 pm | #

Jill writes:
acaum writes: "So what happens ... after this occurs. ... What happens after that? More of the same, global reset, what?"

-- Didn't you get the memo? We're in "uncharted territority" (Bushism, sorry). Everything's up for grabs. Sorta like musical chairs.
Jill | 03.16.08 - 6:39 pm | #

Keep It Simple, I'm Stupid writes:
FiveAcres, Conjure Bag is my little, furry, friend who knows a few things about the stock market.

When you introduce him, do you ever say, "Say hello to my little friend!"
Keep It Simple, I'm Stupid | Homepage | 03.16.08 - 6:40 pm | #

ajn writes:
ITS DONE $15-20 TAKEUNDER JPM
ajn | 03.16.08 - 6:40 pm | #

Sivaram Velauthapillai writes:
me writes: "Why would you issue money to the banks to help them when it is the consumer that need help. If consumption is 70% of the macro economic equation why would you help the 30% (generalizations)? "



Banks grease the wheels of capitalism. For the last 300+ years, bank failures have almost always caused serious problems for the economy. Banks are the intermediaries that provide loans, match savers to borrowers, and so forth. Furthermore, the FedRes isn't providing free money to the banks. It is only loaning them money. If the FedRes was providing free money, then yes, I would agree that it should given them to consumers rather than banks.

In any case, Bear Stearns isn't even a conventional bank and the only reason they are important is because they are a top broker on Wall Street. Collapse of Bear Sterans will negatively impact other brokers, investors, hedge funds, and so forth and that's what the FedRes is trying to avoid. Otherwise, Bear Stearns isn't really that important.
Sivaram Velauthapillai | Homepage | 03.16.08 - 6:41 pm | #

acaum writes:
where's that info from
acaum | 03.16.08 - 6:42 pm | #

Octavio Richetta writes:
Michael writes:
Dear God,
Please let JP Morgan be colossal knife catcher. I've been wanting to see them take it in the juggler since the last depression.
Michael | 03.16.08 - 6:35 pm | #


Unfortunately, Dimon ain't that dumb...
Octavio Richetta | 03.16.08 - 6:42 pm | #

Luv Guv writes:
A small sample of those expensive and quirky models were a problem for me as well especially when I became client #9. Therefore, I can empathize with Alan Greenspan here for what that is worth. Thank you and my best to each of you in the future. I need to devote some time to my family now.
Luv Guv | 03.16.08 - 6:42 pm | #

masaccio writes:
I feel like the mouse in the fields when the buffalo stampede.
masaccio | 03.16.08 - 6:42 pm | #

Justin writes:
Citic made 1.75 billion last year, a five-fold increase on the year before. So a bear stearns is created in china just as one vanishes in nyc.
Justin | 03.16.08 - 6:43 pm | #

acaum writes:
sorry.

ajn writes:
ITS DONE $15-20 TAKEUNDER JPM
ajn | 03.16.08 - 6:40 pm | #


where's that info from
acaum | 03.16.08 - 6:43 pm | #

Jill writes:
Sivaram Velauthapillai writes: "Furthermore, the FedRes isn't providing free money to the banks. It is only loaning them money."

-- You are a comedian! Somehow, I don't think we'll be seeing that money again.
Jill | 03.16.08 - 6:44 pm | #

Drew writes:
Let me ax you a question.

Can you say Dow 6000? By May.
Drew | Homepage | 03.16.08 - 6:44 pm | #

FFDIC writes:
What Jill said.
FFDIC | 03.16.08 - 6:45 pm | #

Sebastian writes:
Jill asked: "Anybody around when Drexel went under? Enlighten us, please!"

Yup. The liquidity for junk bonds just began to dry up when they first ran into real trouble, since they were such a major player in that area.

I remember one high-yield fund I used to sell a lot of (I'm a former stockbroker) that took a major NAV hit (-40% or more) during the last couple of years that Drexel limped along.

Of course, that was heading into and during the 1990-91 recession, so I'm not sure the comparison is accurate. This looks a lot more like a super-size LTCM problem, since the economy isn't weak.


S.
Sebastian | 03.16.08 - 6:45 pm | #

hdude writes:
Just bought myself some more gold. (pre 33) If I can't eat it, it least I can look at em. Sure are pretty.
hdude | 03.16.08 - 6:46 pm | #

Octavio Richetta writes:
Yen/usd creeping up, gold going down. Deal done?
Octavio Richetta | 03.16.08 - 6:48 pm | #

RE writes:
Dollar down at 71.39. -.26
RE | 03.16.08 - 6:48 pm | #

acaum writes:
cnbc story on jpm bid for bear.
acaum | 03.16.08 - 6:48 pm | #

acaum writes:
jpm bid for bear

http://www.cnbc.com/id/23658905
acaum | 03.16.08 - 6:49 pm | #

sue writes:
Guess it's a good time to open a new bank, I think I'll call it.

First Skeleton Free
sue | 03.16.08 - 6:50 pm | #

scotty_at_the_helm writes:
I just heard walmart is bidding against buffett to take bear below $5??
scotty_at_the_helm | 03.16.08 - 6:51 pm | #

acaum writes:
"Here's what makes this a tricky situation: "

Ruh-oh
acaum | 03.16.08 - 6:51 pm | #

Marcus Aurelius writes:
zig | 03.16.08 - 6:01 pm

Creating or stealing value?

It's the latter. The way this played out at Bear Stearns was very interesting.

Everything was hunky-dory until the Feds showed up. In this case the "Feds" being the FRB (BSC's partner/guardian ad litem/enabler) and more importantly, the FBI.

Once law enforcement is brought into the picture, it's game over. Immediately. (No waterboard was needed).

Why was law enforcement involved? Law enforcement doesn't get involved if they don't suspect a crime has been committed. Were warrants used, or was it a social visit?

The bad thing is, I have a feeling that a visit by the FBI to any major Wall Street player would have had identical results.

In the end, this will be a law enforcement issue. Massive fraud has been committed by all players. Part of this fraud was using the complexity of the "products" and supply channels to redistribute not just risk, but also culpability. The devil is hidden in the details. The best we can do at this point is to start rounding up suspects (to keep them from an Enronesque shredding episode), and replacing them, temporarily, with teams of Federally-employed CPAs (direct hires, not contractors). We need to know know what we're dealing with before we can fix it.

Looking at the major players in our suddenly Fascist-smelling arrangement between the banks, the corporations, and the Federal Government, I'm really not surprised at the level of looting that has gone on for the past 7 years.

I also will not be surprised if the FBI is called off, or the DOJ refuses to investigate.
Marcus Aurelius | 03.16.08 - 6:51 pm | #

Anonymous writes:
If Bear is taken out at 15 dollars what happens to those 6 dollar Bear puts. I know some people on this board have them
Anonymous | 03.16.08 - 6:53 pm | #

EnFuego writes:
can we all just stop takling about BSC and stand in awe of the Alien Tiger Woods.
EnFuego | 03.16.08 - 6:54 pm | #

Jill writes:
Scotty at the Helm, you are such a tease! Would that it might be true. WalMart! Too much.
Jill | 03.16.08 - 6:54 pm | #

Anonymous writes:
I don't know what everyone is so excited about... so the BS exposure to derivatives is 14.3 trillion but that's notional value. What's the worst case ? 10 pct of the notional

that's only $1.4 Trillion
Anonymous | 03.16.08 - 6:55 pm | #

scotty_at_the_helm writes:
Re: were warrants used, or was it a social visit?

Just social probably..LOL, I have heard good things about the food

Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings Tuesday that they are cooperating with requests for information from various, but unspecified, regulatory and government agencies. Officials at the companies either declined to comment, or could not immediately be reached.


The Company has received requests for information from various regulatory
and governmental entities relating to subprime mortgages, mortgage
securitizations, collateralized debt obligations, and synthetic products related
to subprime mortgages. The Company is cooperating with the requests.

The Goldman Sachs Group, Inc. and certain of its affiliates have, together with various underwriters in certain offerings, received subpoenas and requests for documents and information
from various governmental agencies and self-regulatory organizations in connection with investigations relating to the public offering process. Goldman Sachs has cooperated with these investigations.



FBI officials also highlighted what they called a growing pattern of suspected mortgage loan fraud potentially committed when loans were made to shaky borrowers. They cited a surge in "suspicious activity reports" that banks are required to file with the government.
scotty_at_the_helm | 03.16.08 - 6:56 pm | #

scotty_at_the_helm writes:
Hmmm

Suspicious Activity Report (SAR) Program

Background
This page provides a link that allows banks and other filers prepare and file Suspicious Activity Reports (SAR). Under 12 CFR 21.11, national banks are required to report known or suspected criminal offenses, at specified thresholds, or transactions over $5,000 that they suspect involve money laundering or violate the Bank Secrecy Act. Similar regulations by other regulators apply to other financial institutions.

http://www.occ.treas.gov/sar.htm
scotty_at_the_helm | 03.16.08 - 6:58 pm | #

Anonymous writes:
Posted on Kitco:

IMPORTANT:Due to the volatility of the market, we are experiencing a significant increase in the volume of shipments going out. Although Kitco and our depositories are working hard to stay on top of this, you may experience a delay in your order being processed by our vault, and sent out to you.
Anonymous | 03.16.08 - 6:58 pm | #

flowcreek writes:
US$ is down to 98 yen in Tokyo.
Anybody knows whether BoJ or whoever has bought the USD 1 Trillion is marking to market or can they delay the writedown of now about US$ 200 billion.
The German Central bank must mark to market annualy, just wrote down about US $3 billion (E2.3 billion), but they have only about $30 billion.

What about China? It's slow motion, but then 1.4 trillion is something.
flowcreek | 03.16.08 - 6:59 pm | #

squeezed writes:
Chimp in chief is meeting with PPT Mon.

Emergency PPT meeting.
squeezed | 03.16.08 - 6:59 pm | #

Kicker writes:
So what happens to the market, economy, consumer, foreign investors, inflation, treasuries, etc. after this occurs.

Depends on when it happens....

I've got a deflation bent and in mostly cash. I'm betting on a strong consumer slow-down that will pull the rest of the world into a global recession.

But, there are a couple of things that would make me run for cover and direct monetization of assets by the Federal Reserve would be one of them.

If it were to happen tomorrow, I'll move into precious metals, commodity stocks, mortgage REITs, banks, and multi-nationals. Anything but cash, bonds, and "bond like" equities (preferred, utilities, etc)

But the only way to really "make money" in an inflationary environment is with debt. Either leveraging up on margin or investing in companies that do.

But, if the Fed starts to monetize assets after the "global slowdown" those with the highest leverage may not survive until then.

The other things that keep me awake at night are:

- Decoupling
- Large fiscal stimulus packages
- Wage inflation
- Strong consumer spending (boomer inheritance, reverse mortgages, un-tapped savings)
- A sharp (and early) drop in energy prices
Kicker | 03.16.08 - 7:00 pm | #

NorkaWest writes:
Sebastian & Jill:

I was with an insurance company at the time. We had some unsettled trades with them (DVP-Delivery-Versus-Payment).

We (our lawyers) had to fill out a bunch of paperwork to resolve the trades. It took a while.

Fortunately, our assets were custodied at a bank so it was a small problem of a few trades in the total portfolio. If they were the custodian (e.g., prime broker for a hedge fund, clearing firm for a smaller brokerage firm, or an individual with a personal brokerage accout), we would have been in a world of hurt until we could get access to our assets or funds.
NorkaWest | 03.16.08 - 7:00 pm | #

ron writes:
YEN 98.28! 200 M.P.H. tape is what this JP buyout of Bear is all about..
ron | Homepage | 03.16.08 - 7:01 pm | #

mp writes:
'In looking upon the wreckage of this firm, you may see just a collection of kettles and pots, but I see an opportunity to become wealthy beyond the wildest imaginings of greed and avarice. So, bid accordingly.'

-ca. 1750, London, auctioneer at brewery asset sale
mp | 03.16.08 - 7:01 pm | #

scotty_at_the_helm writes:
hmm.. random sample FYI

http://www.fincen.gov/sars/ sar_b..._by_numb_09.pdf

In 2007, Suspicious Activity Reports filed by the securities and futures industries characterizing the
suspicious activity type as Securities Fraud increased 171% over those filed during the same period
in 2006.
• The suspicious activity type Computer Intrusion increased 47% in the first six months of 2007. The
increase in the first six months of 2007 is greater than all 2006 filings.




The suspicious activity characterization Mortgage Loan Fraud increased 35% from the
corresponding six-month period in 2006 and was the third most prevalent type of suspicious activity
reported, after Bank Secrecy Act/Structuring/Money Laundering and Check Fraud.


As of June 30, 2007, over 4.7 million Suspicious Activity Reports had been filed with FinCEN.5 Since January
1, 2003, filings by non-depository institutions, individually, and as a whole, continued increasing, and are
encompassing a greater portion of the Suspicious Activity Reports within the Bank Secrecy Act database. In
2001, ninety-six percent of the Suspicious Activity Report database consisted of depository institution
Suspicious Activity Reports; presently the figure is sixty-four percent.
scotty_at_the_helm | 03.16.08 - 7:02 pm | #

Jill writes:
My turn to announce: 329 Visitors Online at 6:58 PM Eastern, your times may vary.
Jill | 03.16.08 - 7:04 pm | #

scotty_at_the_helm writes:
Law & Order OT:

Financial institutions filed a record 15,000 suspicious activity reports (including instances of mortgage fraud) with the Federal Bureau of Investigation in the first fiscal quarter of this year. If the pace keeps up, more than 60,000 SARs will be filed, outstripping 2007, when 46,717 reports hit the system.

In a briefing on January 29, FBI officials said the agency has 14 major “corporate fraud” investigations under way involving mortgage or related companies. The focus, officials said, was on subprime mortgage firms, their accounting and lending practices, and insider trading. The agency did not specify any cases, but it is well known that the collapse of New Century Financial, is the subject of a major probe.

As previously reported, the Securities and Exchange Commission is investigating the failure of several subprime firms, focusing on, among other things, their investment bankers, including Bear Stearns, Merrill Lynch, and Morgan Stanley.
scotty_at_the_helm | 03.16.08 - 7:05 pm | #

Spooky writes:
JPM doing the deal for $2/share.
Spooky | 03.16.08 - 7:07 pm | #

Marcus Aurelius writes:
Scotty,

Thanks for the info. I guess this might be a little too big for the FBI/DOJ to ignore.
Marcus Aurelius | 03.16.08 - 7:08 pm | #

Jim writes:
UBS is in the thick of it again...

it being "deep doo doo,? right?
Jim | 03.16.08 - 7:09 pm | #

Keep It Simple, I'm Stupid writes:
Could I ask that people not post bogus messages that the deal is done with a price? That joke has already been used; you aren't funny.
Keep It Simple, I'm Stupid | Homepage | 03.16.08 - 7:09 pm | #

Jill writes:
Spooky, do you mean $2.2 billion, or slightly less than $20 a share?
Jill | 03.16.08 - 7:09 pm | #

Spooky writes:
Its not a joke.
Spooky | 03.16.08 - 7:09 pm | #

andy in NZ writes:
ASX in the red at start of trading, down 0.78% 2 mins after open.
andy in NZ | 03.16.08 - 7:09 pm | #

Spooky writes:
$2/share, in stock.
Spooky | 03.16.08 - 7:10 pm | #

Mark D writes:
CNBC can't verify $2 a share
Mark D | 03.16.08 - 7:10 pm | #

scotty_at_the_helm writes:
Not off topic, and related to FBI, IRS, SEC & Bear being watched FYI:

But what really snared Spitzer was a money laundering investigation that was flagged by suspicious activity reports (SARs) that banks have to file with the Treasury to surface everything from money laundering to terrorist activity. This network has been around for a while, but its importance escalated following the Sept. 11, 2001 terrorist attacks. According to the FBI’s charges the prostitution ring that counted Spitzer as a customer was investigated due to some shady bank accounts, checks and wire transfers with big totals ($39,000, $400,000 and others).

According to the FBI’s complaint :

In or about October 2007, the FBI and the United States Internal Revenue Service-Criminal Investigative Division (”IRS-CID”) began an investigation focusing on an organization suspected of conducting prostitution and money-laundering crimes in the United States and Europe.

According to the Associated Press, this investigation began with a suspicious activity report on Spitzer. The Wall Street Journal reported that Spitzer’s transactions looked like they were kept below $10,000 to avoid federal reporting rules. This behavior to avoid the $10,000 threshold also helps the Feds find strange behavior, say 150 transactions between $7,000 and $9,000. The Journal notes:
scotty_at_the_helm | 03.16.08 - 7:10 pm | #

Jim writes:
I think I said anything over $1 a share would be a godsend.
Jim | 03.16.08 - 7:11 pm | #

Yalt writes:
From the JPM press release:

"Based on the closing price of March 15, 2008, the transaction would have a value of approximately $2 per share."

http://biz.yahoo.com/bw/080316/2...05053.html? .v=1
Yalt | 03.16.08 - 7:12 pm | #

Carlomagno writes:
Bloomberg TV just claimed the deal is done, no price announced.
Carlomagno | 03.16.08 - 7:12 pm | #

andiron writes:
USD gapdown again against Euro: $1.5722 now..
Dump your dollarcash and go headlong in euro. Better yield and appreciation to boot.
Who knows by yr end we may have 2$= 1Euro
andiron | 03.16.08 - 7:13 pm | #

Mark D writes:
CNBC verified $2 a share
Mark D | 03.16.08 - 7:13 pm | #

Octavio Richetta writes:
Spooky writes:
JPM doing the deal for $2/share.
Spooky | 03.16.08 - 7:07 pm | #


The level of uncertainty in asset-liability assessment due to the type of instrument involved and leverage makes the 2 or 20 bucks a share price useless as a stick to measure the deal. if JPM were to miss it would be in the hook for a lot more than a couple bil. Of course, unless Benny gives him free insurance. Let the share price be zero and then talk...
Octavio Richetta | 03.16.08 - 7:13 pm | #

km4 writes:
Just the beginning downfall of Wall St crooks aided and abetted by policies of Greenspan, The Fed, the inept and incompetent Bush admin and their pathetic cronies.

America please make sure and thank these asshats for this financial mess because you'll be paying for it for years to come !
km4 | 03.16.08 - 7:13 pm | #

Punditry writes:
Mark D writes:
CNBC can't verify $2 a share
Mark D


cnbc can't verify that Kudlow isthe largest buyer of coke in the tri-state area, even though ten limos a day arrive at the palisades carrying dirt poor colombians with special suitcases.
Punditry | 03.16.08 - 7:14 pm | #

Ministry of Truth writes:
JPM bid at least $2 over if this is true
Ministry of Truth | 03.16.08 - 7:14 pm | #

NorkaWest writes:
Thank you, Yalt.

I needed to know that the deal was done.
NorkaWest | 03.16.08 - 7:15 pm | #

Ziggurat writes:
http://online.wsj.com/article/ SB...=googlenews_wsj
Ziggurat | 03.16.08 - 7:16 pm | #

Dave writes:
I'm pasting the following from a post I made over at Piggington:

**********

First of all - and this will be obvious to anyone who understands basic balance sheet accounting - if your equity is levered 30 to 1 (as apparently is the case at Bear Stearns), then if your assets are "actually" worth 3.5% less than your GAAP books indicate, well, your equity is worth just less than zero. So, if anyone's paying a price above zero for the equity of this Black Hole of Risk (as I like to call the big investment banks and money center banks), then they must by definition be assuming that the "cash flow value" from certain Bear Stearns businesses (the custodial side, for example, among others) must be greater than the losses embedded in the on-balance sheet assets and off-balance sheet liabilities. I don't pretend to know if this is the case or not. I'm just offering up a blinding glimpse of the obvious, yet at the same time scratching my head.

Second, I've conducted a fair number of bank-related due diligence projects in my career, albeit primarily on small banks (of less than $500 million in assets). These are pretty simple companies. And yet a team of a dozen people will still need about a week to conduct a proper due diligence. And a definitive merger agreement will generally take at LEAST another two weeks to craft. That's for a simple, small bank. So, now imagine the complexity of doing due diligence on a company of the size and complexity of Bear Stearns. I think in a standard acquisition of a large investment bank (that is, one that's not under duress), you'd probably need at least a month to complete due diligence and it would involve a hundred or more people. And JP Morgan, et al are expected to complete theirs in three days? This is completely ludicrous.

Which leads me to believe that either (a) the Fed will "backstop" this acquisition; that is, it will be forced to assume losses above a certain level for the acquirer in order for the deal to happen, or (b) the acquirer is going to slash and burn values on Bear Stearn' business and balance sheet to create huge margin of safety in the purchase price. (b) makes all the sense in the world. But, back to my original point, here's the rub with (b): How do you get to a margin of safety if Bear is leveraged 30 to 1? It doesn't seem possible... which brings us back to (a)...

Anyhow, should be interesting.
********
Dave | 03.16.08 - 7:16 pm | #

Ziggurat writes:
It has to be $20 /share and a typo......
Ziggurat | 03.16.08 - 7:17 pm | #

Marcus Aurelius writes:
Well, hell - their Good Will alone is worth more than that.

I think I just heard a gigantic flushing sound.

OTOH, might have been a jet.

Sheesh.
Marcus Aurelius | 03.16.08 - 7:17 pm | #

CalculatedRisk writes:
$2 a share. New thread started.

Wow. Essentially nothing for the shareholders.

Best to all.
CalculatedRisk | Homepage | 03.16.08 - 7:17 pm | #

Yalt writes:
If the press release is to be believed (and I don't know why not), it's about as done as can be:

Other than shareholder approval, the closing is not subject to any material conditions.

Not the way I thought this would go down, to be honest.
Yalt | 03.16.08 - 7:18 pm | #

Jill writes:
The Fed is promising $30 Billion (more?!?) to cover, you know, contingencies.
Jill | 03.16.08 - 7:18 pm | #

Ziggurat writes:
never mind


0.05473 per share
Ziggurat | 03.16.08 - 7:18 pm | #

Justin writes:
cnbc look stupid with their "scoop" of "$15-$20" a share.
Justin | 03.16.08 - 7:18 pm | #

mal writes:
so what's our next apocalyptic crisis?
mal | 03.16.08 - 7:18 pm | #

Jill writes:
Lehman.
Jill | 03.16.08 - 7:19 pm | #

Carlomagno writes:
Fed cut discount rate by .25?
Carlomagno | 03.16.08 - 7:19 pm | #

Carlomagno writes:
Dow futures getting a big boost, mini-Dow now at +100.
Carlomagno | 03.16.08 - 7:22 pm | #

mal writes:
yeah but how long is that gonna last? 2 hours after open, before some other disaster rears its head?
mal | 03.16.08 - 7:22 pm | #

s0mebody writes:
Here Here to the Alien Tiger Woods. Freakin' incredible.
s0mebody | 03.16.08 - 7:23 pm | #

scotty_at_the_helm writes:
Right, this will be spun into BIG news and the market will go up o Fed bailout...watch!
scotty_at_the_helm | 03.16.08 - 7:25 pm | #

scotty_at_the_helm writes:
1. Pump news of great deal that will be good for wall street.

2. call off FBI

3. Pump up market

4. Drop rates.

5. Ignore dollar, because ben did a paper on this in High School:

The day is saved!!

Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002
Deflation: Making Sure "It" Doesn't Happen Here 

But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior).8 

hus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

8:Keynes, however, once semi-seriously proposed, as an anti-deflationary measure, that the government fill bottles with currency and bury them in mine shafts to be dug up by the public.
scotty_at_the_helm | 03.16.08 - 7:27 pm | #

Kicker writes:
Other than shareholder approval, the closing is not subject to any material conditions

After a 99% loss, I'd be tempted to play chicken with the Federal Reserve.

Give me more than $2 dollars you clowns or I'll bring down the system!
Kicker | 03.16.08 - 7:30 pm | #

Justin writes:
funny how even at $2/share JPM couldn't find $2b in cash. They had to pay with more IOUs (their stock certificates).
Justin | 03.16.08 - 7:31 pm | #

Kicker writes:
So, how