“J.P. Morgan paid less for Bear Stearns than the LA Galaxy paid for David Beckham,” said Andrew Clarke, sales trader at SG Securities in Hong Kong.

It's interesting to note that JPMorgan will be overseeing the day to day operations before the merger is complete (or even approved).

It will be interesting to see if the Fed's action (guaranteeing Bear's obligations) is permissable.

http://money.ninemsn.com.au/article.aspx?id=393118

Thanks!

http://docs.google.com/TeamPresent?docid=ddp4zq…

Very arguably. Every time there is a downturn or even the whiff of one (which is naturally hyped to ridiculous proportions) when a Republican in office it's the next Great Depression, etc. [yawn]

The main thing is that there should be no bailouts. Sadly, too many people (not just the vast numbers who willingly took on larger debts than they ever could hope to manage, during the real estate bubble) want “something done” (so they enjoy a risk and responsibility free life) while even people in the federal government and economists, who should know better (not blatantly political Dem Party hacks like Krugman, but serious economists) not only believe Washington will consider a number of financial institutions too large and important to fail, but that this is how things _should_ be — even in the case of institutions that have engaged in poor or even crooked practices.

Yes, Shaun, we have no problem with corporate welfare in a capitalist state. If the bailout were going to New Orleans residents who lost everything-then there'd be a big problem!

Heard of SIPIC lately, I guess not.

However, SIPIC is completely irrelevant because JP Morgan would assume responsibility for any cash and securities held in brokerage accounts.

If Bear had failed, then SIPIC would have forced bankruptcy and liquidated any assets to compensate customers – unless of course investment fraud was proven.

However, I am not a 'true' capitalist. I do believe that some government regulation and oversight is required, but balouts like this. Anti-competitive monopoly laws and things like the Glass-Steagall laws that raised walls against banking self-interest are a good thing.

Here is a good overview of the repeal of an important piece of legislation (in 1999), that has led directly to the current banking problems – Re-thinking Glass-Steagall.

Key point from it:

Kuttner:

The enormous loopholes in financial regulation—the hedge fund loophole, the private equity loophole, are justified on the premise that consenting adults of substantial means do not need the help of the nanny state, thank you very much. But of course investor protection is only one purpose of regulation. The other purpose is to protect the system from moral hazard and catastrophic risk of financial collapse. It is this latter function that has been seriously compromised…

…[I]f you are going to rescue markets from their excesses, on the very reasonable ground that a crash threatens the entire system, then you have an obligation to act pre-emptively, prophylactically, to head off highly risky speculative behavior. Otherwise, the Fed just invites moral hazards and more rounds of wildly irresponsible actions.

Since he's commented her on that subject, maybe Dave Schuler can clarify. He has a pretty good post at his own blog about what the bailout potentially means. Executive summary: It won't be pretty.

There is no question in my mind no matter the Fed's status that the taxpayer will be taking an enormous hit.
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How?

If the U. S. government bails out some banks using funds out of general revenues, that would constitute “the taxpayers taking a hit”. Otherwise, no.

“Odd” is a big part of the problem. There is no question in my mind no matter the Fed's status that the taxpayer will be taking an enormous hit.