NEW YORK -- Bear Stearns & Co.'s assets under management have shrunk 20 percent since the end of November, and stock and fixed income trading has plummeted to "well less" than half of activity levels in 2007 and the first quarter of this year, the company said in documents filed with the Securities and Exchange Commission late Friday.
The investment bank, which is being taken over by JPMorgan Chase & Co., with backing from the Federal Reserve, nearly collapsed last month after bad bets in the mortgage market dried up its access to capital and severely deteriorated its ability to generate earnings. With rumors leaking through the market that the bank was in danger of running out of money, investors did not want to trade with Bear Stearns or lend the company money. The SEC filing details rapidly deteriorating conditions that have impaired the New York investment bank's ability to conduct business as it once had. Assets under management fell to $36 billion from $46 billion between the end of its fiscal year on Nov. 30 and March 24. A substantial number of its prime brokerage clients moved accounts to other firms and customer margin balances fell 23 percent to $66 billion since the end of its 2007 fiscal year, according to the filing. "The extremely challenging market environment and the unique issues associated with the operating environment of the company have adversely affected the company's day-to-day business operations," the company said in the filing. Bear Stearns said it faces a rapid loss of trading partners and customers and may be forced to file for bankruptcy protection and liquidate its assets if the company's deal to sell itself to JPMorgan does not close. With the bank's stock trading at about $30, JPMorgan stepped in with a $2 per share offer that was later raised to $10. In the days leading up to the offer from JPMorgan, Bear Stearns released statements suggesting the company's finances were sound. Still, nervous investors sold shares sending the stock down more than 60 percent the first 10 days in March. The shares traded as high as $159.36 apiece in the last 12 months. In a separate SEC filing Friday, JPMorgan said a private equity firm expressed interest in exploring a transaction with Bear Stearns on Saturday March 15, and proposed a deal that included a $3 billion cash infusion in return for 90 percent equity interest in the firm. The proposal required a $20 billion credit facility from an not-yet-formed consortium of banks and assurance that the New York Fed would make loans available to Bear Stearns through its discount window for one year. Later that day, JPMorgan met with representatives from Bear Stearns and its investment bankers to discuss a deal that would value Bear Stearns at $8 to $12 per share. It also considered buying 19.9 percent of the then outstanding shares, options to purchase its prime brokerage business and Bear Stearns' headquarters building.But by Sunday, JPMorgan expressed doubt that it would do the transaction because of the risk involved and informed Bear Stearns, the U.S. Treasury and the New York Fed, that to proceed, it would need some level of financial support from the New York Fed. Meanwhile, Bear Stearns was considering potential bankruptcy and liquidation options, and the private equity firm was trying to put together details to make its proposal viable, the filing said. Meanwhile, Bear Stearns' management did not believe it could open for business on Monday without a transaction that restored market confidence in the firm. Adding pressure to the situation, the firm was advised that it would not be able to start trading in Asia the next morning and would have to disclose that fact Sunday evening, New York time. The private equity buyer was unable to secure funding for the credit facility portion of its proposal in time and was not able to get support from the New York Fed, leaving JPMorgan as the only bidder. JPMorgan said, based on the New York Fed's willingness to provide $30 billion in special funding, it thought it could work toward a deal that valued Bear Stearns at $4 per share, but eventually decided that it could not offer more than $2, which was subsequently accepted.
STAFF FUMES OVER JPMORGAN'S BEAR TRAP By MARK DECAMBRE
April 26, 2008 -- As JPMorgan Chase wraps up the Federal Reserve-inspired buyout of Bear Stearns, some shattered Bear employees are fuming over a seemingly sweet severance package that very few could end up getting. JPMorgan is offering what appears to be a sweetheart bonus and severance package to Bear employees as they aid their new handlers merge operations and tie up pending deals, sources tell The Post. Many so-called revenue producers, including bankers and salespeople and traders as well as administrative employees, at Bear look to bag their regular pay, bonuses and severance for watching the untimely demise and dazzling loss of wealth of their franchise. But there's a catch. If JPMorgan offers a Bear transitional employee a job, even if it pays less than their original gig, the employee receives nothing if they turn down the new job. To be sure, JPMorgan has tried to be mindful of the unavoidable fallout from its integration of the two storied franchises, especially since JPMorgan is widely expected to hand out pink slips to at least half of Bear's 14,000 employees. JPMorgan has established a so-called "talent network" to help workers identify jobs in other areas of the combined company or at competitors, according to a memo distributed internally. Still, Bear staffers who witnessed the nearly overnight destruction of their net worth and family nest eggs couldn't help but feel slighted by what some call a take-it-or-leave-it ultimatum in regard to their jobs. "It's like quitting so they blackmail you into working for the firm or getting nothing so essentially everybody wants the transition package," one irritated Bear managing director told The Post. A JPMorgan spokesman confirmed the context of the internal memo but declined to comment further.
Mortage aid idea boosted by Bear bailout The Washington Post
The Senate Banking Committee approved legislation Tuesday that would empower the Federal Housing Administration to provide relief to mortgage borrowers teetering on the brink of default. The House has already passed similar legislation. Only two months ago, mortgage aid was viewed as unlikely, but the odds now favor it becoming law. For this change of fortune, the legislation’s chief sponsors, Sen. Chris Dodd of Connecticut and Rep. Barney Frank of Massachusetts, should thank one person in particular: Federal Reserve Chairman Ben Bernanke. Politicians seeking to expand the role of government to help ease problems in the mortgage market face an inconvenient fact: Most Americans own their homes outright, meet their mortgage payments or are renters. As a consequence, mortgage relief never polls well. When people are asked whether they think government aid should be given to households failing to meet their mortgage obligations, a majority routinely says no. The average American, meeting the struggle to live within his or her means, bridles at the notion that those who are overextended should be helped. ALTERING DEBATE The Federal Reserve’s decision in March to lend to the investment bank Bear Stearns changed this debate forever. Fed officials took the unprecedented action of extending the agency’s safety net beyond the banking system. Presumably, they were balancing the risk that other failures would be triggered should Bear, the nation’s fifth-largest investment bank, default on its obligations against the precedent of such lending. It is probably impossible for anyone who was not in the room during those negotiations to accurately assess that balancing act. Still, there is one certainty: That decision to solve the problem immediately at hand will have long-term consequences. In particular, the Fed’s action tipped the political balance toward providing direct subsidies to households having trouble meeting their mortgage payments. The bailout of Bear’s creditors has allowed the political question to be reframed. Now voters can be asked more than whether federal aid should be given to overextended homeowners. Consider a question such as: “Given that the government has provided funds to an investment bank, do you think government aid should also be given to households failing to meet their mortgage obligations?” The word “also” describes an expansion of government and a redis- tribution of income as an exercise in fairness. In effect, greater unfairness among households in offering debt relief to some now seems insignificant when compared with the unfairness wrought by the Fed between the financial sector and households. REPUTATION HURT Another casualty of the Bear bailout is the Federal Reserve’s reputation. The Fed has dealt with financial crises before. A key component in its response to past crises was that it entered each episode with open, but empty, hands. It would provide liquidity to the market as a whole, or even to banks, but it drew a firm line against lending to other institutions. That posture gave the Fed special status as an honest broker. Pages from this central banking playbook include the encouragement of depositories to lend after the default of Penn Central in the commercial paper market in 1970, the provision of reserves after the stock market crash in 1987, and the good offices given to the privatesector creditors of Long-Term Capital Management in 1998 to work toward a mutually benefi - cially solution that did not involve taxpayer funds. What will happen the next time top officers of key investment banks are thrown together to discuss a failing institution? Those titans of finance, not a charitable lot by profession, will no doubt ask: Where is the government’s contribution? While it was 70 years before the Fed lent in earnest to a non-bank firm for the first time, they will know that this does not mean that it will be 70 years until the next time. They will hold back, and hold out, until taxpayers’ funds are at risk. The world has changed because of a few snap decisions made one weekend in March. We do not yet have an adequate understanding of what happened and why. But we can be sure that the Fed’s action will be used to argue for more spending and more regulation.
Shareholders OK takeover of Bear Stearns by JPMorgan Chase BY MADLEN READ AND JOE BEL BRUNO The Associated Press
NEW YORK — Bear Stearns shareholders have approved JPMorgan Chase’s buyout, ending the saga of the 85-year-old pillar of Wall Street that crumbled under the weight of its own wagers on high-risk mortgages. The tumult is far from over, however, for JPMorgan Chase & Co. — which now must mesh Bear Stearns’ maverick culture with its own — and the thousands of workers affected by the takeover. Bear Stearns officially becomes part of JPMorgan Chase on Friday, after a widely anticipated “yes” vote that won with 84 percent of the vote Thursday morning at Bear Stearns’ midtown Manhattan headquarters. All told, the deal was worth about $2.3 billion. JPMorgan is spending $1.4 billion for the fi rm itself, and spent an additional $900 million over the past month-and-ahalf buying up Bear Stearns stock to guarantee the deal would go through. Thursday’s meeting, led by Bear Stearns’ chairman James Cayne and CEO Alan Schwartz, lasted less than 10 minutes, leaving some Bear Stearns’ shareholders angered by the speed at which the deal closed. “They were up there drinking coffee paid with my money … and we lost our money overnight,” said Hannah Horgan, a Bear Stearns shareholder. “I have nothing left, and they were so calm.” Back in January 2007, before mortgage defaults began clobbering banks and draining demand from the debt markets, Bear Stearns had traded at $171 a share. Now, JPMorgan is buying the firm for about $10 a share. The acquisition is resulting in thousands of layoffs at both Bear Stearns and JPMorgan. “I think it’s a shame,” said Davis Edwards, who was loading the contents of his office into an SUV parked outside Bear Stearns Thursday. Edwards worked as a mathematician for Bear Stearns for 11 years. “This was a very prolific and lucrative firm,” Edwards said. “There’s a lot of good people in there.” Outside of Bear Stearns’ headquarters Thursday, people hawked $20 T-shirts with a caricature of Cayne playing the violin on the 19th hole of a golf course, while portrait artist Geoffrey Raymond displayed a five-by-four-foot rendering of Cayne, known by some as “Jimmy.” Raymond, who plans to sell the work on eBay at a starting bid of $3,500, allowed passers-by to scribble notes on the painting. Some of their comments: “Hubris — thy name is Jimmy,” and “Now you know what B.S. stands for.” Bear Stearns and JPMorgan are not the only companies suffering job cuts — some 65,000 people have lost jobs at various banks, brokerages and lenders nationwide over the past 10 months. But Bear Stearns got hit particularly hard. Its troubles can be traced back to last June, when two of its hedge funds collapsed. Those fund casualties not only foreshadowed the investment bank’s own demise, but also effectively launched the recent credit crisis by showing how much damage the slumping mortgage market could incur on the companies that bought, repackaged and sold the loans. The deal’s approval comes as no surprise — since offering to take over the firm two-and-a-half months ago at the behest of the U.S. government, JPMorgan Chase & Co. has purchased nearly half of Bear Stearns Cos. stock, virtually guaranteeing shareholder approval. JPMorgan also upped its initial offer of $2 a share to $10 a share after outcry from Bear Stearns shareholders, many of whom are employees that JPMorgan intends to keep on staff. But just as the world’s financial system has far to go in recovering from bad bets on debt, so does JPMorgan in its integration of Bear Stearns. “Doing the deal is the easiest part,” said John Koob, who works in mergers, acquisitions and restructuring at Towers Perrin. “When the champagne cork pops, the real work now begins.” JPMorgan shares rose 71 cents, or 1.7 percent, to close Thursday at $43.57, while Bear Stearns shares rose 17 cents, or almost 2 percent, to $9.55. Most industry experts believe the deal will be eventually be lucrative for JPMorgan. “Six months from now, who knows whether it will be good, bad, how things will be impacted. Six years from now, people will be saying this was a good decision,” said Sandler O’Neill & Partners bank analyst Jeffrey Harte. JPMorgan has the backing of the New York Federal Reserve. The two parties said Thursday the previously announced sale of $30 billion in Bear Stearns assets to JPMorgan will happen on or around June 26. Meanwhile, the timing of the Bear Stearns buyout, while difficult because of the turbulent credit environment, may end up being ideal for JPMorgan. Towers Perrin and London’s Cass Business School recently released a study that found that historically, the deals creating the most value occur in post-peak years — like this year. Still, the acquisition process could be a rocky one for JPMorgan, which has suffered its own big losses in loan investments. The integration will not only involve taking on Bear Stearns’ distressed securities, but also managing the approximately 7,000 Bear Stearns employees coming aboard and retaining the clients of what was once the nation’s fifth-largest investment bank. “It’s a fairly large, fairly complicated integration,” Harte said. “Cultural meshing can be a challenge.” Mayiz Habbal, senior vice president of the securities and investments group at Celent, noted also that some 700 systems between the two firms need to be synchronized. It will likely take six months for JPMorgan to sift through Bear Stearns’ assets, he estimated, and about two years to integrate the people, systems and real estate.
2 charged in mortgage meltdown Bear Stearns managers accused of lying to investors BY TOM HAYS The Associated Press
NEW YORK — Two former Bear Stearns hedge fund managers were hauled into jail Thursday and charged with lying to investors about the collapse of the subprime mortgage market, perhaps signaling the start of a wave of prosecutions arising from the housing meltdown. Ralph Cioffi and Matthew Tannin were accused of encouraging investors to stay in their hedge funds, heavily exposed to subprime mortgages, even as they knew the credit market was in serious trouble. They were indicted on conspiracy and fraud counts, the first criminal charges to hit Wall Street in the housing market meltdown. The eventual implosion of their two hedge funds cost investors $1.8 billion and started the domino effect that led the demise of Bear Stearns itself, which barely avoided bankruptcy in a rescue buyout by JP Morgan Chase & Co. “This is not about mismanagement of a hedge fund,” Mark Mershon, head of the New York FBI office, told reporters. “It is about premeditated lies to investors and lenders.” The arrests came as the Justice Department in Washington announced the indictments of more than 400 players in the real-estate industry since March in a crackdown on mortgage fraud. Sixty were arrested on Wednesday alone. That alleged fraud includes misstatement of income or assets, forged documents, inflated appraisals and misrepresentation of a buyer’s intent to occupy a property as a primary residence. The Bear Stearns case against Cioffi and Tannin appears to be based heavily on a series of e-mails that reveal panic and disorder behind the scenes at the hedge fund as its investments began to slide. “The subprime market looks pretty damn ugly,” Tannin wrote to Cioffi in April 2007. If Bear’s internal reports were accurate, Tannin suggested, “I think we should close the funds now,” and “the entire subprime market is toast.” The situation became so dire that Cioffi pulled $2 million of his own cash from the fund, but the pair still told investors that they should stay in and that the outlook was good, prosecutors said. Cioffi, 52, was arrested by FBI agents at his Tenafly, N.J., home Thursday morning, and Tannin, 46, was taken into custody outside his Upper West Side apartment building. Both men pleaded not guilty at an afternoon arraignment and were released on bond. Cioffi’s bond was set at $4 million, Tannin’s at $1.5 million; both were secured by their homes and other property. The men, who face up to 20 years in prison, left court with their wives and without speaking to reporters. They are due back in court July 18. The mortgage market crisis “took the whole financial world by surprise,” said Cioffi’s attorney, Edward Little. “So our question is, why is Ralph Cioffi being charged in this case?” Tannin’s lawyer, Susan Brune, said he was “being made a scapegoat for a widespread market crisis. He looks forward to his acquittal.” Legal experts said more Wall Street figures would probably be charged in the credit crisis, the latest front for white-collar prosecutors who brought — and in most cases won — high-profile cases earlier this decade after the fall of Enron. “There is no doubt the government is always looking to go as high as they can,” said Bill Leone, a former U.S. Attorney in Colorado. “Any time you get losses into the billions, the likelihood that higherlevel executives participated in decisions increases.” Subprime mortgages were sold to people with less-than-ideal credit. Many of them began defaulting on their loans when the housing market fell and their introductory “teaser” interest rates shot up, making their payments unaffordable. Because many of those mortgages were sliced and repackaged as securities that could be bought and sold, the mass defaults caused widespread pain among large U.S. banks. The collapse of the two Bear Stearns funds is just a small part of the subprime crisis, which is still rippling through the economy. Amid the fallout for banks, prominent CEOs have lost their jobs, including Citigroup Inc.’s Charles Prince, Merrill Lynch & Co.’s Stanley O’Neal and Bear Stearns Cos.’ own James Cayne, who was stripped of his CEO title. Hedge funds cater to large investors and the very wealthy and use complex, speculative investing methods in hopes of winning enormous gains. They operate with little government supervision and have lately come under fire from regulators. In the Bear case, the internal emails provide a window into the trouble that began to engulf the hedge funds in 2007. The indictment describes a meeting of Cioffi, Tannin and two unnamed colleagues in which Cioffi confided the hedge funds had narrowly “averted disaster” in February 2007 — news that “led to a vodka toast to celebrate surviving the month.” The complaint says Tannin expressed doubt about Cioffi’s management in an one e-mail last March to a third fund manager with only question marks in the subject line. The e-mail said, “Is Ralph doing what he should be doing right now?”
“There is no doubt the government is always looking to go as high as they can,” said Bill Leone, a former U.S. Attorney in Colorado. “Any time you get losses into the billions, the likelihood that higherlevel executives participated in decisions increases.”
dont tell me those at the top, middle or lower rings of the 'government' didn't know and weren't profiting themselves----whitewater anyone? big oil anyone?
they are ALL the same and it's a sham sham sham.......maybe the 'controls' safety nets weren't there but when one participates as if it is okay to do it, that same vote means 'yes, it's okay'......just because something isn't illegal doesn't mean it is right and just.......
campaign finance, lottos, etc........
Quoted Text
Barack Obama’s 1.5 million donors were a financial spigot that was just too rich to shut down. The Democratic presidential candidate on Thursday became the first presidential candidate from a major party to bypass public funds for the general election since the Watergate era. In so doing, he abandoned his once-stated desire to compete within a system designed to reduce the influence of money in politics. His Republican rival, John McCain, said he would accept the public money for the fall campaign — $85 million available from early September until Election Day — and declared that Obama had broken his word. Obama, who has shattered fundraising records, is likely to raise far more than the taxpayer-financed presidential fund can supply.
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
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