So yesterday I posted something cautiously optimistic and in response Bear Stearns nearly sunk the U.S. financial system. I want to apologize to everyone for jinxing the global economy. 8O
So in the tradition of the Panic of 1907, J.P. Morgan once again rides to the rescue, backed this time by the Federal Reserve. It's obvious the reason they're doing it is because they literally can't NOT do it -- a collapse of Bear Stearns would force a huge wholesale dumping of mortgage-backed and other securities onto an already stressed market. Bear Stearns controls 350 billion in assets. It would be a systemic financial meltdown.
Question is, what does 28 days of financing GET them? They say to convince their customers, etc. that they're worthy and not be afraid -- but doesn't a short-term bailout just send the signal that all of their creditors and customers have just 28 days to get their money out?
I'm thinking some kind of breakup or long-term government bailout and restructuring will have to occur and the 28 days really just gives all the parties time to figure out what the structure will be.
The larger question of course is, how many others of these are there?
Eerily, once again The Carlyle Group (historically the private equity firm of the Bush family, the bin Laden family and other global market players) is at the center of it all. Speculation of Bear Stearn's collecting worthless collateral from the Carlyle Group triggered the rampant speculation that led to the sudden shutdown of Bear Stearn's access to short-term capital lines. But that's a matter for another forum.
So in the tradition of the Panic of 1907, J.P. Morgan once again rides to the rescue, backed this time by the Federal Reserve. It's obvious the reason they're doing it is because they literally can't NOT do it -- a collapse of Bear Stearns would force a huge wholesale dumping of mortgage-backed and other securities onto an already stressed market. Bear Stearns controls 350 billion in assets. It would be a systemic financial meltdown.
Question is, what does 28 days of financing GET them? They say to convince their customers, etc. that they're worthy and not be afraid -- but doesn't a short-term bailout just send the signal that all of their creditors and customers have just 28 days to get their money out?
I'm thinking some kind of breakup or long-term government bailout and restructuring will have to occur and the 28 days really just gives all the parties time to figure out what the structure will be.
The larger question of course is, how many others of these are there?
Eerily, once again The Carlyle Group (historically the private equity firm of the Bush family, the bin Laden family and other global market players) is at the center of it all. Speculation of Bear Stearn's collecting worthless collateral from the Carlyle Group triggered the rampant speculation that led to the sudden shutdown of Bear Stearn's access to short-term capital lines. But that's a matter for another forum.
