Bear Stearns Bought By JPMorgan Chase
JPMorgan Chase has announced, in what’s a sign that the US economy is having some very serious problems, that it’s buying Bear Stearns for $2 a share. This while Bear Stearns “recently valued at well over $100 a share, and selling for over $50 as recently as last Thursday.”
Of course all of this doesn’t automatically mean that Americans should prepare for the biggest recession in decades, but it’s a very real problem nonetheless and is likely to be in the advantage of the Democratic nominee (for president).
Meanwhile, it seems that the Fed is willing to do whatever it takes to prevent companies such as Bear Stearns from going broke. As Paul Krugman writes, “the big bailout is coming.” The question then becomes, as Krugman points out, “[w]hen the feds do bail out the financial system, what will they do to ensure that they aren’t also bailing out the people who got us into this mess?”
The problem with such an approach is that a bailout won’t work if you’re not willing to ‘bail out’ those who “got us into this mess.” Why? Because everyone is basically involved in one way or another. All the ‘victims’ at least. The companies, yes, but also your average citizen who took on a mortgage he or she couldn’t afford. These people too should have known better.
This is really more of a fire sale than a bailout. I read elsewhere that today may be the closest we come to a black monday redux?
And history repeats itself..again and again.
JP Morgan has surely come a long way since the days of trying to overthrow FDR…or have they?
I for one say, good call Bob!
Although I wouldn’t expect much more support on your assessment.
However, I would not be surprised if we start seeing this happening with other banks as well. (Maybe not right away, but months or a year or so) If that is the case, then yes, it will be a bailout trend. In that case, it will then appear to be more of a systemic crisis, confidence in the FED will be almost nil and if the bailout trend starts continues, then we should be looking for very tough times ahead. (look for signs from companies like Carlyle Capital Corporation, UBS, Merrill Lynch, Lehman Brothers, JPMorgan Chase, ING, Deutsche Bank, Credit Suisse, Citigroup, BNP Paribas and Bank of America). You know, the big banks..
And if this does end up being a bailout trend, to add insult to injury, the FED will esentially be protecting banks that attempted to enrich themselves through wild speculative bets on dubious toxic investments which are now / will become utterly worthless.