by Scott Creighton
JP Morgan Chase already recieved one huge payday when they snapped up Bear/Stearns for next to nothing at $2.00 a share while the Fed, with our tax dollars, covered the Bear Stearns losses for them, and now they are ready for the next identical score with WaMu. I guess it pays to have connections to the Board of the Federal Reserve.
“JPMorgan Chase has agreed to pay a minuscule $2 a share to buy all of Bear Stearns after that 85-year-old banking institution began reeling from the nation’s credit crisis – a shocking deal because it represents less than one-tenth of the firm’s market price on Friday.” Venture Beat
“As part of the JPMorgan accord announced today, the Federal Reserve has agreed to help it guarantee the Bear’s trading obligations, including fund up to $30 billionof Bear Stearns’s “less-liquid assets.” Venture Beat
Two of the wealthiest families in America own JP Morgan Chase, the Morgans and the Rockefellers. Incidentally, it was in George P. Shultz’ living room that the Vulcans met and worked for months prior to the presidential election of 2000. Shultz of course is a life-long friend and advisor to the Rockefellers. The Vulcan‘s were Bush’s foreign policy advisers like Rice, Wolfowitz, Steven Hadley, G.P. Shultz, and others. Small world, huh?
There was much made of the Bear Stearns deal in the press, but they didn’t really cover the core part of the transaction; that’s the part that says JP Morgan Chase got the institution for a tenth of the market value, and even then, we had to bail them out to even further sweeten the pot. Why they didn’t just bailout Bear Stearns with the $30 billion dollars in the first place gives you a pretty good idea of what the Fed and the Treasury Department are really up to.
Now, the WaMu deal is heading in the exact same direction.
Right now, Washington Mutual is valued at having over $307 billion dollars in total assets, and this seizure and sell-off to JP Morgan Chase, is costing that firm only $1.9 billion.
Now you would think that would be a pretty good deal to start with, but wait, it gets better.
“U.S. taxpayers, meantime, could end up shouldering billions of dollars worth of shaky mortgages and other investments that contributed to WaMu’s demise. Such a scenario assumes the massive bailout proposed by Treasury Secretary Henry Paulson, or something like it, will be approved and JPMorgan will sell WaMu’s least desirable assets to the government.” MSNBC
The WaMu write down/bailout may cost taxpayers as much as $31 billion dollars if Sec. Paulson’s deal goes through as planned. Once again, had the Fed not seized WaMu and forced the selloff to their favorite financial institution, then WaMu could possibly have held out long enough to take advantage of the Paulson deal themselves.
Kinda makes you wonder what else will be seized with the $700 billion Paulson Plan and then handed over to JP Morgan Chase, doesn’t it?
Kevin M. Warsh was appointed to the Federal Reserve Board of Governors in 2006. His previous experience was with the Mergers and Acquisitions department of …Morgan Stanley. Morgan Stanley was founded by, you guessed it, Henry Morgan, son of J.P. Morgan of JP Morgan Chase.
So, what we have here is a Mergers and Aquisitions guy on the Fed. Reserve Board of Governors, actively helping to make decisions that seize assets and firms, and then hand them over for next to nothing, for a firm with ties to his old company; the company he will almost certainly return to when the next president appoints his own Board of Governors. A firm that he probably still holds stock options in.
One might say this represents a slight conflict of interest.
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