Bear Stearns: Welfare BAD; Capitalism & free market IS GOOD

[Dueller]

Federal government to bail out Bear Stearns. Couldn't let our fine corporate citizens fend for themselves in the marketplace, now could we?

[Nathans_Dad]

I'm not saying this bail-out was good or bad as I don't have the pertinent facts, however you of course understand that "bailing out" a corporation is done in order to protect the economy in general and avoid massive layoffs.

If they allow Bear Stearns to fend for themselves and that means Bear Stearns lays off 10,000 people, is that a good thing or a bad thing?

[NICKG]

they shopuld take the people who work there and reduce their pay..especially the executive who no doubt earned millions...

[Dueller]

Point well taken, ND. But let's say you're....ahhhhh....a doctor. And let's say you have 15 employee's. But you made some bad business decisons and you got strapped in a cash flow problem. So you can't pay your creditors or your employees. And you're gonna have to shut it down and work the night shift at an ER.

Think the government is gonna come to your rescue?

[Porsche-O-Phile]

How can progress and change be made if we simply keep defending institutionalized stupidity and propping it up?

Yes, 10,000 layoffs would hurt - but we would emerge from that stronger and more "honest" as an economy as all those people sought and obtained jobs in sectors where they were actually in demand.

It's the bailout of Chrysler all over again. It was stupid then and it's stupid now. We sent a message then that "more of the same" was fine, replete with inefficiency, fraud, stupidity and excess and we're doing the same now.

Leave it to government to be even more short-sighted and foolish than corporations can be.

[Dueller]

Mortgage Crisis Hits Bear Stearns Cos., Sending Shares Down Record 53 Percent; Fed Acts to Provide Relief
Friday, March 14, 2008


WASHINGTON — The Federal Reserve invoked a rarely used Depression-era procedure Friday to rescue Bear Stearns Cos. — the nation's fifth largest securities firm — as nervous investors sent the company's share price down a record 53 percent.

The Fed action won immediate praise from the administration, with President Bush saying that Fed Chairman Ben Bernanke was "doing a good job under tough circumstances."

Still, the Fed announcement came in a brief two-sentence statement.

"The Federal Reserve is monitoring market developments closely and will continue to provide liquidity as necessary to promote the orderly functioning of the financial system," the board said. It said members had voted unanimously to approve the arrangement, announced by JP Morgan Chase and Bear Stearns earlier.

Bear Stearns Chief Executive Officer Alan Schwartz said the firm acted in response to "market rumors'" of a liquidity crisis.

"We have tried to confront and dispel these rumors and parse fact from fiction,'' Schwartz said in the New York-based company's statement today. "Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated.''

Bear Stearns said it was in talks with New York-based JPMorgan "regarding permanent funding or other alternatives.''

Delivering a speech on the economy in New York, Bush voiced confidence in the Fed's actions to aggressively cut interest rates and the Fed announcement last week that it would supply up to $200 billion in loans to cash-strapped financial institutions.

"It was a strong action by the Fed and they did so because some financial institutions that borrowed money to buy securities in the housing industry must now repair their balance sheets before they can make further loans," Bush said. "Today's actions are fast moving, but the chairman of the Federal Reserve and the secretary of the treasury are on top of them and will take the appropriate steps to promote stability in our markets."

The plan announced Friday will supply secured funding to Bear Stearns for an initial period of 28 days, seeking to provide short-term relief for Bear Stearns.

Senior Federal Reserve staffers said the arrangement allows JP Morgan Chase to borrow from the Fed's discount window and put up collateral from Bear Stearns to back up the loans. JP Morgan, a bank, has access to the discount window to obtain direct loans from the Fed, but Bear Stearns, an investment house, does not.

This type of procedure, Fed officials said, dates back to the Great Depression of the 1930s but has rarely been used since that time.

Treasury Secretary Henry Paulson praised the Fed's leadership and said that the country's financial system would be able to weather the problems.

"As we have been saying for some time, there are challenges in our financial markets and we continue to address them," Paulson said in a statement. "This is another challenge that market participants and regulators are addressing. We are working closely with the Federal Reserve" and the Securities and Exchange Commission.

Paulson said he appreciated the leadership of the Fed "in enhancing the stability and orderliness of our markets."

The action by the Fed board in Washington represented an endorsement of a rescue effort for Bear Stearns that had already been arranged by JPMorgan and the Federal Reserve's New York regional bank.

It was seen as a last-ditch effort to save the investment bank, which on Friday acknowledged its serious financial problems after a week of denials.

JPMorgan Chase is providing an undisclosed amount of secured funding to Bear for 28 days, backstopped by the Federal Reserve Bank of New York.

The Securities and Exchange Commission issued a statement saying it has been "in close contact" with Treasury, the Federal Reserve and the Federal Reserve Bank of New York during discussions concerning an agreement by J.P. Morgan Chase & Co. to provide a secured loan facility to The Bear Stearns Companies.

"We will continue to work closely together in a way that contributes to orderly and liquid markets," the SEC said.

Last week, the Fed announced an industry-wide rescue package that would provide as much as $200 billion in loans to banks and investment houses and allow them to put up risky home-loan packages as collateral. It was the Fed's latest effort to stem a global credit crisis that began last August with rising loan defaults for subprime mortgages, loans provided to borrowers with weak credit histories.







The last paragraph just slays me...it puts ALL blame on homebuyers and none on the profiteers who were making the loans.

[varmint]

i'm not going to defend corporate bailouts.

[scottbombedout]

Same thing has just happened in the UK with a bank called the Northern Rock.

Taxpayers of the UK have bailed the bank out.

Makes you wonder how many more are teetering on the edge.

[Rearden]

Let it fail, I say.

[Dueller]

****chirp, chirp, chirp***

[stevepaa]

any one miss Enron or Arthur Anderson or Pan Am.

[Porsche-O-Phile]

Braniff had cooler airplanes.

[stevepaa]

LOL, they were ugly as sin.

[Porsche-O-Phile]

So are Southwest's. At least they're colorful though.

[stevepaa]

I am a little biased, I worked for Pan Am in 1969-71. I was on top of hangar 14 at JFK when the first 747 was delivered. I think Pan Am has some of the best looking planes.

[Porsche-O-Phile]

Yea I agree PanAm had a nice motif, but Braniff was SO totally 70s. Trippy.

[The Gaijin]

How about Eastern?

"It was seen as a last-ditch effort to save the investment bank, which on Friday acknowledged its serious financial problems after a week of denials."

Let the Bear fail. Too many people making $500K to multi-million dollar packages to bail out with taxpayer money. Stupid decisions need to have consequences..

[Porsche virgin]

Let Bear fail -- the leadership put the company in a risky position by not investing prudently.

By the same token, let the idiots that bought three houses on spec for 1% down with adjustable rate mortgages fend for themselves, too.

It swings both ways. Take some responsibility for your own actions, people!!!

[varmint]

Originally Posted by Dueller

****chirp, chirp, chirp***

some people have jobs. and can't respond to every post within the hour.

[stevepaa]

on the flip side, because these failings can have far reaching consequences I would favor enactment of lending rules: minimum requirements for loans, etc.

a little regulation is like an ounce of prevention.