Bear Stearns: is that bail-out, or "plunger protection" working the market as a whole ?

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Mortgage and Lending with kandola mortgage services
A forced marriage by the FED

FED must stop the chain reaction before it happens or almost every major finanical institute would face a severe counter party risk based write down(much more uglier than sub-prime).

cheap load(arranged friday) to BSC is useless too as no one would think that is enough and the run would continue and BSC would be forced to file chapter 11.

So they need some big guys to boost the confidence, i.e. JPM.

JPM doesn't really want it or else what would be the difference between 1.28B(that is more likely to be approved quickly by the share holders) vs 286M when they said it can make 1B/year after the completion and cleaning up the mess ? beside, it is not cash but printing more certs. A bit more dilution but worth it if they really want it so badly.

BSC's management doesn't want to give in yet or else they can play hard with the 'I am going to drag everyone down if I don't get say 12/share' trick. As they have depleted all the cash anyway so even their client want to draw money, they have still to wait for the liquidation(to find out what money belongs to whom). A no loss situation for the management(other employee must go immediately though) if they think 10/share is the max they can get(I believe the book is already negative).

the deal sounds more like a 'convertable note' style credit line to me where JPM+FED gives the backing to BSC for 12 months and they hope the situation(the so called dislocation in bond market) would improve and by that time, BSC has unwinded its huge position and have a positive book value and its share holders would reject the deal. And in the meantime, expect the reject it again and again(the agreement is very strange/smelly to allow the share holders to do this)

If that doesn't work, they would take it in and the 1B would be sort of a premium they received, to reduce the risk a bit.

Now whether this would work is beyond anyone's guess since it can send a signal of 'if BSC worth 2/share, how about LEH/GS/MER etc' ? We are already seeing LEH being punished, the next target may be.

I was thinking that the FED would broker a deal in the 30-50 range(forget whether BSC does worth that much as it doesn't matter) that would boost the overall confidence and buy the market some more time. May be they are playing a 'shock and awe' trick hoping a capitulation style bottoming.
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Rainmaker
208,718
Cathy Glass
Realty Executives Associates - Knoxville, TN
Realtor - Knoxville, Tennessee
I'm not sure I understand all this, but it feels sort of scarry.
Mar 16, 2008 11:43 PM #1
Rainer
213,163
Dennis Swartz
Full Circle Property Management - Columbus, OH
MBA, GRI...experience counts!
Now that is a "hard" read. I think the governement needs to stay out of the private market. Bear Stearns is big enough and smart enough to save themselves.
Mar 16, 2008 11:47 PM #2
Rainer
336,470
Chip Jefferson
Gibbs Realty and Auction Company - Columbia, SC
Boy what a mess. When will this wall street financial mess stop?
Mar 16, 2008 11:48 PM #3
Rainer
434,914
Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission.
Florida List For Less Realty, Inc. Broker/Owner. - Cooper City, FL

Bear Stearns did this to themselves. They were the biggest when it came to the Sub Prime market and quite frankly caused this to happen by allowing people to receive mortgages when they couldn`t afford to.

 

Mar 16, 2008 11:52 PM #4
Rainer
2,268
Seth Task
The Task Team of Remax Traditions - Solon, OH
Cleveland, Ohio Area Realtor
I thought I saw this morning that JP bought Bear for $2/share.  Didn't hear the particulars.  Also, the FED dropped the lending rate to 3.25, another quarter point.  Really though, these banks and institutions have no one to blame but themseleves.  We, as Realtors should know this.  All those hedge funds and investment banks kept pushing for more and more sub prime loan packages.  They couldn't be written fast enough.  For decades the system worked just fine, lending money to people who proved they were worth lending to.  Honestly, I can't believe some of the people that qualified for loans during that time.  It's a shameful situation and any compnay that invested in such poor business pratices deserves to be knee deep in it.
Mar 16, 2008 11:54 PM #5
Rainer
126,444
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

At two bucks a share and Chase using DPA (the FEDS to fund) why not. Someone had to take them. Still going to be a bad day on wall street

Tony

Mar 16, 2008 11:59 PM #6
Rainmaker
210,296
James Wexler
wexzilla.com - Scottsdale, AZ

are we going to see  more banks go the way of Bear stearns and Indy Mac ?? or do you think we are near a bottom after the Fannie And Freddie lossses reported recently

Aug 06, 2008 05:08 PM #7
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Rainer
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