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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You are solid on that, willyloman. Another law is being criminaly disregarded. All these littel people with a few stocks mixed in their portfolios and IRA’s think this will save them also…. just wait… it won’t….
I forgot to say on the above comment that Chase bought out circuit city (bank of america, I think) and for the past month has been busy offshoring most of the acquired depts. … thousands of Americans who worked at Circuit City offices around the country are out looking for work while other nations are dancing at our loss.
Fed keeps banks afloat as money market crisis deepens
Thu Sep 25, 2008 6:13pm EDT
NEW YORK/LONDON (Reuters) - U.S. banks and money managers borrowed a record amount from the Federal Reserve in the latest week, nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression.
The data on borrowing from the Fed closed out another day of high anxiety in global money markets. Key measures of funding stress hit record levels on both sides of the Atlantic as nervous market participants awaited developments from Washington on a $700 billion U.S. financial bailout plan.
Federal Reserve data showed on Thursday the total amount banks borrowed nearly quadrupled the previous record of $47.97 billion per day notched just the week before.
“This looks like the balance sheet of a central bank that is keeping the financial system on life support,” said Michael Feroli, U.S. economist with JPMorgan in New York.
Borrowings by primary dealers via the Primary Dealer Credit Facility, and through another facility created on Sunday for Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) and Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) and their London-based subsidiaries, totaled $105.66 billion as of Wednesday, the Fed said.
The Federal Reserve’s lending to U.S. depository institutions and bank holding companies to finance their purchases of high-quality asset-backed commercial paper from money market mutual funds via a new lending facility the Fed announced on September 19, came in at $72.67 billion as of Wednesday.
http://www.reuters.com/article/ousiv/idUSTRE48O9B920080925
Where in the hell is the Fed getting all of this money from?
The country is beyond broke and China has stopped lending to our banks, so where is the Fed coming up with all of this cash?
From TREES.
They cut down the trees, turn them into pulp, then paper, then federal reserve notes.
And you wonder why your food dollar doesn’t buy anywhere near as much as it did last month.
Here’s an article from 2002 featuring Senator Chris Dodd, who’s been huffing and puffing about this Wall Street bailout…except he hasn’t been so huffy and puffy in the past.
Remember Enron?
The odd couple: Chris Dodd and Arthur Andersen
http://www.NewsAndOpinion.com — DEMOCRATS seeking to blame Bush and the GOP for the Enron scandal need to look more closely at their own house — especially at the work done by former DNC Chairman, Senator Christopher J. Dodd..
While many candidates of both parties have received campaign contributions from Enron and its self-serving “independent auditor” Arthur Andersen, very few have passionately fought their cause in Washington as diligently as Chris Dodd. Dodd has received more money from Arthur Andersen than any other Democrat – $54 843.00 – and has aggressively worked to insulate Arthur Andersen and other accounting firms from liability to defrauded investors in cases like Enron.
Moreover, it was on account of Dodd’s tireless efforts that Arthur Andersen was able to act as both “independent auditor” and management consultant to Enron for $100 million a year, a role fraught with conflict -of -interest , that has been identified as one of the major causes of the debacle and an arrangement that makes a joke of the concept of outside auditors to protect shareholders.
In 1995, it was Dodd who jammed through legislation, overriding President Clinton’s veto, to protect firms like Arthur Andersen from lawsuits in cases just like Enron. The Dodd bill limited liability for lawyers and accountants for “aiding and abetting” corporate fraud by their clients, making them liable only for their proportionate share of the blame, rather than for the entire fraud. So, if an accounting firm kept secret the true picture of a corporation’s finances, it would only be liable for a percentage of the total fraud on the investors.
From a shareholders point of view, this creates problems because the fraudulent company has usually stolen all of the assets before the shareholder learns about it, so there’s nothing left. From an accounting company’s point of view, its great – the shareholders cannot pin the total losses on you.
And from Arthur Andersen’s point of view, it was really wonderful, because they were facing thousands of lawsuits for their role in securities fraud. A grateful accounting industry showed its appreciation to Senator Dodd by contributing $345,903.00 to his campaign between 1993 and 1997. Every major accounting firm pitched in – Deloitte & Touche, Ernst & Young, Coopers & Lybrand, Peat Marwick, and Price Waterhouse.
During that same time period, Dodd also received $523,551.00 from the Securities and Investment industry, who were thrilled with other provisions of the bill which placed limitations on securities lawsuits and protected companies that had made predictions about future earnings that did not turn out to be true. Consumer groups had opposed the legislation, and the U.S. Public Interet Research Group labeling it :”The Crooks and Swindlers Protection Act”
But Dodd’s services to Andersen didn’t stop there. Every initial analysis of the Enron scandal lays much of the blame on the conflict of interest that Andersen faced in both auditing and consulting for Enron at the same time. Auditors must be independent to assure that companies do not report misleading financial data to stockholders. Once Arthur Andersen got up to $100 million a year in consulting fees from Enron, does anyone really believe that they would have blown the whistle on its shady books? But, when the S.E.C. tried to bar this conflict of interest, it was Chris Dodd who according to the Associated Press, “brokered a deal” to stop the SEC action.
As a result of Dodd’s intervention, the SEC agreed not to issue a ban on the practice of auditing and consulting for the same client. Such practices have led to what Senator Barbara Boxer (D-Calif) called “the kind of hide-the-debt shell game that took place at Enron.”
In an ultimate act of hypocrisy, Dodd has now actually introduced legislation to ban accounting firms from doing consulting for companies it audits, precisely the same policy he killed when the SEC was considering it. But now that this issue is in the public debate, Dodd is pretending to be an advocate for the shareholders. The Enron workers who lost their pensions and the Enron shareholders who lost their portfolios know it is too late for them. And Arthur Andersen knows it makes no difference to them now.
http://www.jewishworldreview.com/0102/morris1.asp
‘They’ are aleady talking about Jan of 2009 being the final testing period…… if it works, then it will begin to prove it self then or not……
The House voted ‘NO’ to the bail-out.
Wachovia Bank has been bought by Citi-Bank… another bank took over