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PostPosted: Sat Mar 15, 2008 1:47 am    Post subject: Audio: Bear Stearns & Dollar Death Reply with quote

Bear Stearns & Dollar Death

Guest: Don Harold http://www.youtube.com/user/donharrold

The Next Level Show - 19th March, 2008

> New Audio down this thread: LISTEN HERE


Credit crunch woes claim America's fifth-biggest bank

· Bear Stearns seeks buyer despite emergency aid
· Bush's claim that economy is sound falls on deaf ears

Andrew Clark in New York, Larry Elliott
The Guardian,
Saturday March 15 2008


The global credit crunch claimed its biggest victim yet yesterday when the US Federal Reserve orchestrated an emergency bail-out for Bear Stearns after a cash crisis prompted a run on America's fifth biggest investment bank.

In a move that eclipsed the enforced rescue of Northern Rock six months ago, the 85-year-old Wall Street institution admitted it was looking for a buyer after being thrown a temporary lifeline by rival bank JP Morgan Chase guaranteed by the US central bank.

George Bush sought to calm fears of a deep recession in the world's biggest economy when he said that despite the current "tough times", the US economy remained fundamentally sound.

But the president's words did nothing to dampen speculation on Wall Street that other blue-chip investment banks may also be facing a cash crisis as a result of their exposure to the collapsing US real estate market.

The ratings agency Standard & Poor's responded to the rescue announcement by cutting Bear Stearns's credit rating to BBB - the second-lowest investment grade - putting more pressure on its beleaguered stock.

Speculation about Bear had mounted for days. By Thursday, worried institutional clients were withdrawing large sums of money.

That evening, the Fed's governors unanimously voted to come to the bank's aid by guaranteeing a 28-day loan provided by JP Morgan Chase. "Bear Stearns has been subjected to a significant amount of rumour and speculation over the past week," said Bear's chief executive, Alan Schwartz.

"Concern on the part of counter parties, on the part of customers and lenders, got to the point where a lot of people wanted to get their cash out."

Within minutes of the announcement, Bear Stearns's shares halved in value and other banks followed it downwards.

Lehman Brothers' stock slumped by 11% on uncertainty about its credit exposure, while Citigroup, Goldman Sachs and Bank of America all slipped by more than 3%.

Among the biggest losers from Bear's crisis is the British-born billionaire owner of Tottenham Hotspur, Joe Lewis, who bought almost 10% of the bank at the end of last year and has seen the value of his shares dive by more than $750m.

Analysts said the call for help from the Fed amounted to an act of desperation. Carl Lantz, at Credit Suisse, said it meant the bank "didn't have enough money to turn the lights on this morning".

In the markets, the dollar hit fresh lows against the euro and the Swiss franc, and traded below 100 against the yen. Gold again became a haven for investors.

On Wall Street, the Dow Jones industrial average was down more than 307 points by early afternoon. London's FTSE 100 index closed down 60 points at 5631.7.

Bear's difficulties arise from its positioning as a specialist in packaging credit instruments such as mortgage-backed securities. Such reliance left it with far more exposure than its rivals to last year's collapse in the US property market.

Although the Fed is under no obligation to help, its governors are mindful of the potential knock-on effect if a large institution goes bankrupt - billions of dollars' worth of complex credit swaps link the investment banks. Furthermore, Bear is a leader in providing clearing services to hedge funds, and these clients could find themselves temporarily unable to trade if Bear shut down.

"If it did go into receivership, hedge funds would find themselves in a terrible jam," said Samuel Hayes at Harvard University. "They would probably find they couldn't trade securities in the way they usually do."

Bear Stearns has a significant presence in the UK, employing several thousand people at offices in Canary Wharf.

The bank's veteran boss, Jimmy Cayne, stepped back from day-to-day control in January after persistent criticism of his tenure, including allegations he was playing bridge or golf when difficulties mounted last summer.

Bear said it was open to "any strategic alternatives" that would protect its clients and provide shareholder value - a statement widely interpreted as a cry for a white knight bidder to take it over.

Possible purchasers include JP Morgan, which said it was working closely with Bear on securing permanent financing or "other alternatives for the company".


Despite the Federal Reserve's efforts Wall Street fears a big US bank is in trouble

From The Times
March 13, 2008


Siobhan Kennedy and Suzy Jagger

Global stock markets may have cheered the US Federal Reserve yesterday, but on Wall Street the Fed's unprecedented move to pump $280 billion (£140 billion) into global markets was seen as a sure sign that at least one financial institution was struggling to survive.

The name on most people's lips was Bear Stearns. Although the Fed billed the co-ordinated rescue as a way of improving liquidity across financial markets, economists and analysts said that the decision appeared to be driven by an urgent need to stave off the collapse of an American bank.

“The only reason the Fed would do this is if they knew one or more of their primary dealers actually wasn't flush with cash and needed funds in a hurry,” Simon Maughan, an analyst with MF Global in London, said.

Mr Maughan said that the most likely victim was Bear Stearns, the first bank to run into trouble in the sub-prime crisis and the one that, among all wholesale and investment banks, is most reliant upon the use of mortgage securities for raising funds in the money markets.

“The average financial institution was up 7.5 per cent yesterday after the Fed's actions, but Bear Stearns rose just 1 per cent on massive trading volume,” Mr Maughan said. “The market is telling you it's Bear Stearns.”

The Fed's intervention sparked fears of deeper underlying trouble because it came only days after it had made $200 billion (£99 billion) available in emergency funds. The nature of the financing was also unusual, bankers say, because it was the first time that the Fed had offered to lend Treasury securities in exchange for ordinary AAA-rated mortgage-backed securities as collateral.

Chris Whalen, of the financial consultancy Institutional Risk Analytics in New York, said: “The Fed move is confirmation that at least one of the banks is in trouble. A huge part of the banks' inventories are illiquid. If a broker-dealer is illiquid, it dies.”

Speculation has swirled for months about the collapse of an American bank as the credit crisis has escalated and spread from sub-prime to other mortgage-backed securities, treasuries and bonds. As well as Bear Stearns, attention has focused on UBS, the Swiss bank, which has been forced to make more than $18 billion in sub-prime writedowns, and Citigroup, the world's largest financial institution, which has turned to sovereign wealth funds to help to shore up its credit-stricken balance sheet.

Bankers say that mortgage lenders, such as Paragon, Alliance & Leicester and Bradford & Bingley, could also be teetering on the brink soon if they cannot raise enough money in the markets to continue to lend to customers.

All the banks have denied that they are facing a cash crunch and each has said that its liquidity position is strong.

Nonetheless, the speculation continues to mount. Alan Schwartz, the Bear Stearns chief executive, reiterated that stance yesterday after Punk Ziegel analysts gave warning that the bank could be forced to seek a merger partner.

“We don't see any pressure on our liquidity, let alone a liquidity crisis,” Mr Schwartz told CNBC yesterday. He said that Bear had finished fiscal 2007 with $17 billion of cash sitting as a“liquidity cushion”. He added: “That cushion has been virtually unchanged. We're in constant dialogue with all the major dealers, and I have not been made aware of anybody not taking our credit.”

Yet banking sources said yesterday that a collapse seemed inevitable. One senior banker in London said: “Someone will go under in this crisis, that's for sure. The question is whether they stay under or get rescued. Let's see whether this latest round of stabilisation helps, but if it doesn't, it's difficult to see what Plan B is. The Fed can't just keep on printing money.”

One problem with the credit crunch is that banks' solvency positions can change overnight. As banks force firesales of assets to recover their loans from hedge funds, the prices of those assets fall. But as the prices fall, the amount of capital that the banks need rises. Lena Komileva, a Tullett Prebon economist, said: “This is what is fuelling the vicious cycle. Things can deteriorate very rapidly and banks can reach insolvency almost overnight.”

Ms Komileva said it was clear that the Fed was reacting to address a “specific counterparty risk”, although she declined to comment on which bank might be in trouble. She said: “The speed and severity of their action appeared disproportionate to what had actually happened, so, consequently, it seems the Fed really reacted to prevent a Northern Rock-style problem in the US.”

She said that the Fed's moves amounted to window-dressing. “All the signs of stress that were there before are still here,” she said.


Bear Stearns crisis sparks UK recession fears

By Edmund Conway, Economics Editor
Last Updated: 2:12am GMT 15/03/2008


Millions of British households face soaring mortgage rates and tumbling house prices after the global financial crisis triggered the near-collapse of one of the world's biggest banks.

Experts warned that there is now an increased likelihood of a recession and a painful housing slump, after Bear Stearns - America's fifth biggest bank - was forced to turn for emergency cash to the US Federal Reserve.

The news sparked scenes of panic in Wall Street and the City of London, where bank shares tumbled and fears grew that other banks around the world will be hit by the crisis.

While experts said while many of the problems at Bear Stearns, which employs 1,500 people at its London office, were isolated to the company, they underlined the almost unprecedented scale of the financial crisis.

There will be potentially severe knock-on implications for the UK which is already struggling to cope with the credit crunch. British families have already seen their finances squeezed by higher utility bills, food prices and taxes.

Banks in the US and the UK nursing their losses are likely to raise the interest rates charged on mortgages and loans to try to recoup cash from their customers, analysts predicted.

Since the credit crunch first hit last summer, the Bank of England has had to cut its interest rates twice in a bid to stimulate the flagging economy. However, lenders - who have found it increasingly hard to borrow money from each other - have failed to pass on the benefits to their customers.

Some 1.4 million householders are due to agree new mortgages when their fixed rate deals run out over the next 18 months, while around six million have home loans with variable rates.

Friday's developments will increase the pressure on the Bank of England to interest rates faster than expected, perhaps delivering a half percentage point cut in next month's meeting - or maybe sooner.

The Bank left borrowing costs on hold at 5.25 per cent earlier this month. However, even more drastic action may not insulate borrowers from higher mortgage costs.

The growing crisis also places pressure on Alistair Darling, the Chancellor, who is facing questions after he suggested in this week's budget that Britain is well placed to weather the current economic turbulence. Roger Bootle, managing director of Capital Economics, said the growing financial crisis had increased the chances of recession in the UK as families struggle with their finances.

He said the Bank may ultimately have to slash the official borrowing rate to an all-time low of 2 per cent to help save households from further pain.

"They might drag their feet in the short run because they are worried about inflation," he said. "However, eventually we are looking at rises in unemployment and a possible recession, and the longer they delay the lower rates will have to go.

"I now don't rule out rates falling all the way to 2 per cent."

The Bear Stearns crisis also severely undermines the comparatively optimistic economic forecasts delivered by Alistair Darling in his first Budget this week. The Chancellor may be forced to slash spending, raise taxes and borrow even more in the coming months as the economic slowdown takes hold, they added.

Bear Stearns is perhaps the most severely exposed American bank to the sub-prime mortgage crisis sweeping the world's biggest economy.

While it does not lend directly to customers, it indirectly owns billions of dollars worth of mortgage debt - much of which has turned bad as US house prices fall.

Having seen its share price drop by a fifth in the past week alone, it said yesterday it had been bailed out by the Federal Reserve - the US central bank - having failed to find raise money on the open market.

It borrowed the money through fellow US bank JP Morgan Chase because, for technical reasons, it cannot borrow directly from the Fed.

While the bank insisted the money would allow it to continue normal operations, most analysts predicted the bank would more likely either be sold off, nationalised or face collapse. They compared the situation to the crisis surrounding Northern Rock, the high street bank which was nationalised last month.

Peter Spencer, economic adviser to the Ernst & Young Item Club said: "I'm afraid this is now tending towards the apocalyptic scale. This is really the second stage in the credit crisis.

"This will have a definite impact on British households. The point is that mortgage lenders here were until recently raising around a quarter of their funds from international markets. These are now frozen, as we can see from what happened to Bear Stearns. And if the international banks aren't lending to anybody that money's not coming back.

"Quite simply, this means banks will not want to lend out money as freely as they have done in the past.

"We are already seeing the effects with a vengeance now. House prices are falling, mortgage approvals have dropped and we're in a situation where even those with good credit ratings who can borrow are having to do so more expensively."

Banks are reliant for their borrowing on the so-called inter-bank money markets - the bedrock for Britain's finance markets.

In less turbulent times, these remain close to the Bank of England's official rate, in turn allowing banks to offer cheap mortgages to families. However, with banks fearful of lending to each other, the rates have since risen sharply. Yesterday, the pressures in the inter-bank market hit the highest level since December. Analysts said this would have a knock-on effect on mortgage rates.

Despite suffering a chaotic day, shares in London recovered late on, with the benchmark FTSE 100 closing 60.7 points down at 5631.7 points.

He said the Bank may ultimately have to slash the official borrowing rate to an all-time low of 2 per cent to help save households from further pain.

BTW, remember Jim Cramer going nuts about BSC and the need for rate cuts? Didn't work, did it?

Here it is:


But there is hope. Zero percent mortgages available:

atm Shocked
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PostPosted: Sat Mar 15, 2008 11:30 pm    Post subject: Reply with quote

A sovereign wealth fund (SWF) is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments.

Sovereign wealth funds are entities that manage state savings for the purposes of investment. The accumulated funds may have their origin in, or may represent foreign currency deposits, gold, SDRs and IMF reserve position held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of the sovereign nations which are typically held in domestic and different reserve currencies such as the dollar, euro and yen. The names attributed to the management entities may include central banks, official investment companies, state pension funds, sovereign oil funds, among others.

There have been attempts to distinguish funds held by sovereign entities from foreign exchange reserves held by central banks. The former can be characterized as maximizing long term return, with the latter serving short term currency stabilization and liquidity management. This distinction points in the right direction, but is still unsatisfactory.[attribution needed] Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management. Moreover it is widely believed most have diversified hugely into assets other than short term, highly liquid monetary ones, though almost no data is available however to back up this assertion. Some central banks even have begun buying equities, or derivatives of differing ilk (even if fairly safe ones, like Overnight Interest rate swaps).


Bear Stearns is perhaps the most severely exposed American bank to the sub-prime mortgage crisis sweeping the world's biggest economy.

While it does not lend directly to customers, it indirectly owns billions of dollars worth of mortgage debt - much of which has turned bad as US house prices fall.

Having seen its share price drop by a fifth in the past week alone, it said yesterday it had been bailed out by the Federal Reserve - the US central bank - having failed to find raise money on the open market.

It borrowed the money through fellow US bank JP Morgan Chase because, for technical reasons, it cannot borrow directly from the Fed.

(It's not part of the Federal Reserve System of chartered banks. It's like "rogue".)

While the bank insisted the money would allow it to continue normal operations, most analysts predicted the bank would more likely either be sold off, nationalised or face collapse. They compared the situation to the crisis surrounding Northern Rock, the high street bank which was nationalised last month.

I didnt know about Northern Rock.

Peter Spencer, economic adviser to the Ernst & Young Item Club said: "I'm afraid this is now tending towards the apocalyptic scale. This is really the second stage in the credit crisis.

Fascinating. I think it's time to stock up on canned goods.
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PostPosted: Sun Mar 16, 2008 1:11 am    Post subject: Reply with quote

Things can only get worse:


Rising prices and anxiety cause surprise drop in US retail sales

Treasury secretary berates banks and demands changes in market practices

Andrew Clark in New York
The Guardian,
Friday March 14 2008


American consumers are steering clear of shopping centres, as home repossessions and surging household bills hit them in the wallet, according to dismal high-street spending figures that sent the dollar and Wall Street stocks tumbling yesterday.

As the treasury secretary, Henry Paulson, attacked banks for creating obscure financial instruments that exacerbate market turmoil, analysts reacted gloomily to a 0.6% drop in February retail sales - far worse than the widely forecast 0.2% rise.

Mark Vitner, senior economist at the US bank Wachovia, said soaring oil and food prices were leaving shoppers with little spending money. "High gasoline prices have pushed consumers to breaking point," he said, adding that a recession had become undeniable.

"Once the economy slides into recession, my experience from history is that things tend to get worse faster than anybody's expecting," he said.

Scores of major shopping chains, including Wal-Mart, Nordstrom and Abercrombie & Fitch, have reported disappointing takings so far this year.

Even luxury boutiques such as Tiffany are suffering from the downturn.

Dean Maki, chief US economist at Barclays Capital, said: "We're seeing softer spending in the first quarter. Inflation is rising significantly, especially for oil and food. On top of that, the softer labour market is holding back income growth."

Pessimism is taking root in boardrooms: a Duke University survey of 475 chief financial officers found the worst level of sentiment in the study's six-year history: 54% believe the US is already in recession and a further 24% think there is a high risk of one shortly.

The Wall Street Journal's economic forecasting survey showed 71% of respondents putting the US in recession, and 48% of the 55 responses said a 2008 recession would be worse than the last two.

The Bush administration has set out reform proposals which are intended to tackle the credit meltdown through better regulation of mortgage companies, tightening credit-rating procedures, and higher capital ratios for the banking sector.

In a speech to the National Press Club in Washington, Paulson accused financiers of devoting too much energy to inventing esoteric securities that leverage mortgages and other debt, making it impossible to find where ultimate risks lie.

"Some financial products have become overly complex," he said. "Excessive complexity is the enemy of transparency and market efficiency. Investor sentiment has swung hard to risk-aversion, and now the markets are punishing not only complex but non-complex products as well."

A working group set up by George Bush has proposed strengthening Basle II - the international agreement setting minimum capital requirements for banks. The group also recommends cracking down on firms that "shop around" among rating agencies for lenient treatment.

"Market participants' behaviour must change," Paulson said. Although he was not interested in finding excuses and scapegoats, he said the financial sector's turmoil was partly self-inflicted: "Poor judgment and poor market practices led to mistakes by all participants."

Homeowners in the US heartland are still struggling to make repayments on risky subprime mortgages, which sparked the downturn last year. The property firm RealtyTrac calculated that foreclosure papers were filed on 223,651 properties in February - one in 557 households.

The figure was slightly lower than in January but Realty Trac's chief executive, James Saccacio, said the dip was seasonal: "We have still not reached the peak of foreclosure activity in this cycle."

The worst-hit areas include Cape Coral, Florida and Stockton, California. Arizona and Texas also saw a big increase in their rates of repossession. Among those served with foreclosure documents was the singer Aretha Franklin, who is at risk of losing her $700,000 (£350,000) mansion in Detroit over back taxes of $19,192.

Less dough

Even America's pizzas are set to shrink as the nation grapples with a toxic recipe of weak consumer spending and surging prices.

The delivery chain Domino's Pizza is drawing up plans for a "value menu" likely to involve smaller sizes. The move is in response to customers' thrifty mood, as well as pressure from rising wheat costs.

"We're going to try to take an approach where you still see the same product quality," said chief executive Dave Brandon. "But perhaps a different size and perhaps a different bundle so you won't disappoint the customer."

Reflecting America's tradition for enormous helpings, Domino's Pizza sizes are half an inch larger in its home market than in Britain. Michigan-based Domino's has already laid off 50 staff in response to America's economic slowdown.


Broker claims Tesco's US chain is in deep trouble

Julia Finch, City editor
Friday March 14 2008


Supermarket giant Tesco received a double blow today as City analysts claimed the grocer's new US chain is in deep trouble, while its core UK business is being battered by the economy and losing ground to rivals.

One claimed the new California-based convenience stores are missing sales targets by as much as 70% as US shoppers spurn the new Fresh & Easy stores.

Seperately, analysts at Goldman Sachs downgraded the retail giant, urging investors to sell Tesco shares. The shares lost 7p to 386.75p - their lowest level since October 2006.

In a research note entitled "Miles Off Target", Mike Dennis of US broker Piper Jaffray says research among the grocer's US suppliers suggests first-half sales at Fresh & Easy could be just $30m (£14.71m), compared with the $100m the broker had expected.

The analyst says "the issue is very weak footfall" and points to the appointment of Jeff Adams - an American executive recruited from Tesco's operation in Thailand - as evidence of a growing crisis within the West Coast-based business. The Piper Jaffray note says Adams has been parachuted in as deputy to Tim Mason, the former Tesco marketing director who was sent to start the US chain with a team of other British executives. Dennis says: "He is tasked with understanding what has gone wrong with the concept and how they are to recover, if at all, their $700m+ investment so far."

However, Tesco said the analyst's claims were untrue. "We are completely bewildered by this note, which is utterly baseless", said a spokesman. "We are very pleased with customer reaction to Fresh & Easy, which is growing rapidly".

The company described Adams' appointment as "succession planning".

Tesco boss Sir Terry Leahy has big ambitions for the Fresh & Easy business. He has said it could be as big as the core UK business and Mason has outlined plans to build the chain - which opened last November and has already opened 50 stores - into a network of 1,000 stores stretching across California, Nevada, Arizona and north to Washington state. The stores have basic fittings and aim to focus on fresh food and ready meals at market-leading prices.

Dennis also says Tesco is facing problems in the UK, with "a relatively poor performance" in its online businesses. He expects Tesco to announce redundancies in both businesses.

The Tesco spokesman admitted there are likely to be some redundancies within the group, but said they were regular changes "that happen every year".

Last week market research group TNS, whose data is regarded as the gold standard by food retailers, released figures showing Tesco underperforming the wider grocery market and its market share slipping from 31.3% to 30.9% over the past year. Rival Morrisons, meanwhile, has been winning new customers and seeing its market share hit a new record. Asda is also outperforming Tesco.

Sources close to Tesco also suggest that the stores are failing to hit internal targets on non-food sales. Fashion sales are said to be particularly disappointing.

Goldman Sachs has pinpointed US and UK supermarkets as under particular pressure as a result of rising inflation and the consumer downturn. The broker's analysts say the UK is a "high risk market" and that Tesco "is underperforming the UK grocery market in a significant way compared with its robust performance track record".

The two notes came as John Lewis released data showing declining sales last week in all but two of its 25 departments stores. John Lewis sales figures are regarded by investors as a bellwether for the state of the retail sector.

Last week Tesco announced that it was expanding Fresh & Easy into northern California and had identified 19 sites around Sacramento. It also plans to build vast a new distribution centre in the San Francisco Bay area to service hundreds of stores as far north as Seattle.


Stamp seller hopes to profit from market turmoil


Graeme Wearden
Friday March 14 2008

Stamp seller Stanley Gibbons is hoping to profit from the uncertainty gripping the financial markets, after growing its profits by 25% last year.

The company, which is pushing stamps as a credible alternative investment to shares, has doubled its turnover over the last three years. It said today it was enjoying more interest in the most expensive rarities.

"Tighter economic conditions are resulting in an increasing number of investors turning to our products as a means of protecting their wealth by diversifying their asset holdings," said chief executive Mike Hall.

In 2007 sales reached £20m, generating a pre-tax profit of £4.51m. Last year it posted a profit of £3.75m on sales of £16.7m.

The company, which was founded over 150 years ago, has potential sales of £12m lined up through its "wants list" of rare items sought by its customers.

But Hall believes the company could grow faster if more City investors considered putting their money into stamps, rather than more traditional assets such as gold and oil. Both have soared in value over the last few months amid the turmoil on the financial markets.

"A small increase in acceptance by institutional investors would make a significant positive impact on the growth potential of our businesses," he said.

The company also saw a jump in interest in historical signatures. The web is also boosting its income, with online sales more than doubling to £3.5m.

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PostPosted: Sun Mar 16, 2008 11:44 am    Post subject: Reply with quote

Futurist Peter Schwartz talks (2006?) about the future, economics, transparency vs. secrecy in govt, ENERGY, the world growing richer, some people getting poorer, health improvement/rejuvination and LIFE EXTENSION nearer to immortality, the environment, global warming (bunk), global cooling (looks more likely) and risk of an ice age, future amazing technology, corporate responsibility, war, war on terrorism, etc.

Schwartz worked for Royal Dutch Shell as head of scenario planning, and on various other high tech projects.

Interesting. Amongst all kinds of theoretical ideas about the NWO, this guy is at least talking about some real world trends that are more likely to come off.

2 hours
SHITTY source MPEG 300mb

VERY LOW QUALITY - timesync off, still worth it
http://www.Takeoverworld.info/vid/Global_Business_Nk_Peter_Schwartz128.avi (almost uploaded -- 3:30EST 20 min)

GBN Global Business NetworkPeter Schwartz and Mick Costigan (GBN-Monitor's new Future Scholar)

Peter Schwartz (futurist) - Wikipedia, the free encyclopedia
Peter has written many books, on a wide variety of future-oriented topics. Inevitable Surprises (Gotham, 2003) is a look at the forces at play in today's world, and how they will continue to affect the world. His first and most famous book, The Art of the Long View (Doubleday, 1991) is considered by many to be the seminal publication on scenario planning, and is used as a textbook by many business schools. He also co-wrote The Long Boom (Perseus, 1999), a look at a future characterized by global openness, prosperity, and discovery. When Good Companies Do Bad Things (Wiley, 1999), is an argument for corporate responsibility in an age of corruption. China's Futures (Jossey-Bass, 2001), is a vision of several different potential futures for China.

He has also worked as a consultant on several movies, including Minority Report, Deep Impact, Sneakers, and WarGames.

He co-authored the Pentagon's An Abrupt Climate Change Scenario and Its Implications for United States National Security.

Schwartz moderated a forum titled "The Impact of Web 2.0 and Emerging Social Network Models" in Davos in 2007. The forum included Bill Gates, Caterina Fake, Chad Hurley, Mark G. Parker, Viviane Reding and Dennis Kneale.

Peter founded GBN in his Berkeley basement with several close friends including Stewart Brand, Napier Collyns, and Jay Ogilvy. It has since expanded greatly, and become a major consulting firm. In 2001, it was bought by the Monitor Group, though it continues to operate as a separate entity. Peter is the chairman of GBN, and an active participant in its many seminars and projects.

Peter also featured in:

Bob the Angry Flower is a black-and-white comic strip that tells the exploits of an easily angered anthropomorphic flower named Bob and his interactions with the world, often in search of either global domination or love. Though the strip features a range of recurring characters, most strips stand alone with little or no continuity.

He or someone in the audience mentions Thomas P.M. Barnett of the Pentagon. Barnett writes and speaks from a similar worldview, a futurist in the Pentagon, wars to defeat non-state "bad guys".

To contradict this high tech future of global prosperity, check out the series on Pandora's Box posted on YouTube by "SixYearsLeft". It's an Adam Curtis series. I've not yet watched it all, but the beginning is part of the rise of the Soviet technocracy and how it was developed, the rise to power of the "bourgeois engineers", the attempts to make a rational, technical society, and implications for the rest of the world. One of the models the Soviets used was the industrial "Magic City" of Gary, Indiana.

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PostPosted: Sun Mar 16, 2008 9:44 pm    Post subject: Reply with quote


Wall Street fears for next Great Depression

Independent UK - By Margareta Pagano, Business Editor
Sunday, 16 March 2008

Wall Street is bracing itself for another week of roller-coaster trading after more than $300bn (£150bn) was wiped off the US equity markets on Friday following the emergency funding package put together by the Federal Reserve and JPMorgan Chase to rescue Bear Stearns.

One UK economist warned that the world is now close to a 1930s-like Great Depression, while New York traders said they had never experienced such fear. The Fed's emergency funding procedure was first used in the Depression and has rarely been used since.

A Goldman Sachs trader in New York said: "Everyone is in a total state of shock, aghast at what is happening. No one wants to talk, let alone deal; we're just standing by waiting. Everyone is nervous about what is going to emerge when trading starts tomorrow."

In the UK, Michael Taylor, a senior market strategist at Lombard, the economics consultancy, said on Friday night: "We have all been talking about a 1970s-style crisis but as each day goes by this looks more like the 1930s. No one has any clue as to where this is going to end; it's a self-feeding disaster." Mr Taylor, who had been relatively optimistic, has turned bearish: "It really does look as though the UK is now heading for a recession. The credit-crunch means that even if the Bank of England cuts rates again, the banks are in such a bad way they are unlikely to pass cuts on."

Mr Taylor added that he expects a sharp downturn in the real UK economy as the public and companies stop borrowing. "We have never seen anything like this before. This is new territory for us. Liquidity is being pumped into the system but the banks are not taking any notice. This is all about confidence. The more the central banks do, the more the banks seem to ignore what's going on."

Mr Taylor added that the problems unravelling at Bear Stearns are just the beginning: "There will be more banks and hedge funds heading for collapse."

One of the problems facing the markets is that, despite the Fed's move last week to feed them another $200bn, the banks are still not lending to each other.

"This crisis is one of faith. We are going to see even more problems in the hedge funds as they face margin calls," said Mark O'Sullivan, director of dealing at Currencies Direct in London. "What we are waiting for now is for the Fed to cut interest rates again this week. But that's already been discounted by the market and is unlikely to help restore confidence."

Mr O'Sullivan added that the dollar's free-fall is set to continue and may need cuts in European interest rates to trim the euro's recent strength against the dollar. "But the ECB doesn't like cutting rates," he said.

On Europe, Mr Taylor said that while the German economy remains strong, others such as Italy's and Spain's are weakening. "You could see a scenario where the eurozone breaks up if economies continue to be so worried about inflation."

European financial markets were relatively unscathed by Wall Street's crisis but traders expect there to be a backlash when stock markets open tomorrow.

The Fed's plan will give 28 days of secured funding to Bear Stearns, which saw its value slashed over the week by more than a half to $3.7bn. JP Morgan will provide the funding, but the Fed will bear the risk if the loan is not repaid. Fed chairman, Ben Bernanke, who pumped $200bn of loans to cash-strapped institutions last week, said more would be available to help others in distress.



Dollar Falls to Record on Speculation Subprime Losses Widening

By Laura Cochrane and Stanley White

March 17 (Bloomberg) -- The dollar fell to record lows against the euro and the Swiss franc on speculation more banks will report credit-market losses after JPMorgan Chase & Co. and the New York Federal Reserve bailed out Bear Stearns Cos.

The dollar declined to a 12-year low against the yen after the Daily Telegraph said yesterday Goldman Sachs Group Inc. will reveal $3 billion in writedowns when it releases quarterly earnings tomorrow. Traders have increased bets the Fed will slash interest rates one percentage point tomorrow.

"The U.S. dollar will remain under pressure," Benedikt Germanier and Alina Anishchanka, strategists at UBS AG, the world's second-biggest foreign-exchange trader, wrote in a March 14 report. "Easing monetary policy, ongoing uncertainties in the financial sector and rising fears of capital outflows are chief reasons for our short-term bearish outlook."

The dollar declined $1.5748 per euro, the lowest since the common European currency's debut in 1999, before trading at $1.5727 at 7:44 a.m. in Tokyo from $1.5674 late in New York on March 14. The dollar fell to a record low of 0.9863 Swiss francs. The U.S. currency declined to a 12-year low of 98.11 yen, before trading at 98.34 from 99.09.

The dollar set record lows against the euro the past four days as investor confidence tumbled, sending U.S. stocks lower for a third straight week and driving gold to a record high of $1,009 an ounce.

Fed Meeting

The U.S. currency has lost about 16 percent against the euro and 15 percent versus the yen in the past year as the worst housing slump since 1991 forced the Fed to cut its benchmark rate 2.25 percentage points to bolster the economy, lowering returns on dollar deposits.

The New York Fed agreed to provide financing through JPMorgan for up to 28 days after Bear Stearns said its "liquidity position" had "significantly deteriorated." Bear Stearns shares fell 47 percent in New York trading.

The likelihood the Fed will cut its target by one percentage point to 2 percent at the March 18 meeting rose to 56 percent on March 15, up from 6 percent a week earlier, futures on the Chicago Board of Trade showed. The balance of bets is on a cut to 2.25 percent. The euro region's main rate is 4 percent.

The dollar briefly rebounded on March 14 on speculation global central banks will support it for the first time since 1995, when it sank to a post-World War II low of 79.75 yen.

European Central Bank President Jean-Claude Trichet said on March 13 that "disorderly" moves among currencies were "undesirable." He spoke in a French-language interview with Le Point magazine. Japanese Finance Minister Fukushiro Nukaga said last week abrupt currency moves are "bad" for economic growth. President George W. Bush said the U.S. believes in a "strong dollar."

The Group of Seven, which next meets April 12-13 in Washington, said when they met in February in Tokyo that "excess volatility and disorderly" movements are "undesirable."

The G-7 may signal its intent to consider coordinated intervention, strategists at UBS AG, the world's second-biggest currency trader, wrote in a March 3 report. The group comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada.


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John Muir

Joined: 07 Feb 2006
Posts: 345

PostPosted: Sun Mar 16, 2008 10:50 pm    Post subject: Reply with quote

Could this all be a plot to kill off the euro? I thought that this quote was most interesting from Fintan's post.
On Europe, Mr Taylor said that while the German economy remains strong, others such as Italy's and Spain's are weakening. "You could see a scenario where the eurozone breaks up if economies continue to be so worried about inflation."

When you think about how Venezuela is now switching over to the Euro for some of its transactions. All of this financial turmoil coud be used to kill of the only real competitor to the dollar. This is what would happen if the "eurozone" dies.

Venezuela Switches
To Euros For Oil

CARACAS (AFP) - Venezuelan state oil giant PDVSA has decided to sign some oil contracts in euros in the face of a plummeting dollar, local media reported, citing officials.

"There are some contracts in euros, contracts for crude, products and spot markets in euros. This is a subject which we are working on," said energy minister and Petroleos de Venezuela (PDVSA) chief, Rafael Ramirez, in an interview with the journal El Universal published Friday.

It remained unclear which oil sales would require payment in euros.

Venezuela, Latin America's leading petroleum producer, has previously backed Iran's proposals for OPEC to abandon the dollar and use the euro for oil pricing. But the Organisation of Petroleum Exporting Countries has rejected the idea, at least in the short-term.

The head of the journal Petroleum World, Elio Ohep, said the shift to euros was "good business" for Venezuela.

"PDVSA always had an interest to negotiate in dollars because the company had refineries in the United States and needed cash but currently with the euro rising, it is taking in more dollars and (Venezuelan) bolivars," he said.

The dollar hit new lows this week against the euro and yen, with the euro at 1.5669 dollars at 21000 GMT on Friday.

Venezuela produces 3.3 million barrels of oil a day, according to official figures, and 2.4 million according to the InternationalEnergy Agency. Half of its production is sold to the United States market.

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JPMorgan buys Bear Stearns for $2 a share


By Francesco Guerrera in New York and Henny Sender in Abu Dhabi

Published: March 16 2008 18:03 | Last updated: March 17 2008 01:49

JPMorgan Chase agreed on Sunday to buy Bear Stearns, the stricken US investment bank, for about $236m in shares in a deal that puts an end to Bear’s 85 years of independence and highlights the risks faced by banks during the credit crunch.

JPMorgan’s cut-price takeover of Bear, which has the backing of the Federal Reserve and the Treasury, came as the Fed cut its discount rate for direct loans to banks and created a special lending facility for primary dealers – two emergency moves aimed at stabilising financial markets.

JPMorgan said that in addition to the loans extended to Bear on Friday, the Fed had agreed to fund up to $30bn of Bear’s less liquid assets – a move that will alleviate the need for a fire-sale of mortgage-backed securities.

The arrangement by the Fed significantly decreases JPMorgan’s risks and underlines the authorities’ concerns at the prospect of seeing one of the largest US investment banks go under.

People close to the situation said the Fed and Treasury pressed for a deal before the opening of Asian markets on Monday morning because they wanted to stave off a run on other US and European banks.

However, the deal, which values Bear at just $2 per share, compared with the $169 hit in January last year and the $30 reached on Friday, will wipe out most of the value of the investments of Bear’s shareholders.

Senior Fed officials sought to reassure investors that Bear has placed itself in a uniquely vulnerable position and that no other large Wall Street institutions faced such grave problems.

They denied the move was a bail out of Bear – which was undone by investors’ rush to withdraw funds amid rumours over its financial health – but was instead an orderly resolution to a difficult situation.

Before the deal was announced, Hank Paulson, Treasury secretary, had sought to allay fears that the crisis of confidence that hit Bear would spread to the rest of the financial sector. “The government is prepared to do what it takes to maintain the stability of our financial system,” he said. “That’s our priority.”

Investor sentiment towards financial companies is likely to take another knock this week when investment banks, including Goldman Sachs and Lehman Brothers, are expected to report first-quarter losses in their leveraged loans and mortgage-related portfolios. On Friday, Lehman announced a $2bn unsecured credit line to shore up its balance sheet.

The takeover will enable Jamie Dimon, JPMorgan’s chairman and chief executive, to add Bear’s prime brokerage franchise and mortgage business to his bank. JPMorgan, which is expected to incur a $6bn one-off charge to pay for potential litigation and shrink Bear’s balance sheet, is also likely to retain Bear’s New York headquarters, which are worth around $1bn.

However, JPMorgan is likely to sell other businesses, such as the investment bank, and to lay-off many of Bear’s 14,000 employees .

JPMorgan had been contacting clients to inform them of the coming consolidation. An executive in its private banking side told one client that the private bank had taken control of $150m in assets of Bear’s clients.

“JPMorgan stands behind Bear Stearns,” Mr Dimon said on Sunday. “This transaction will provide good long-term value for JPMorgan Chase shareholders.”

Alan Schwartz, Bear chief executive, said: “The past week has been an incredibly difficult time for Bear Stearns. This transaction represents the best outcome.”

Additional reporting by Demetri Sevastopulo, Peter Thal Larsen, Anuj Gangahar and Hal Weitzman

More of the same useless medicine:


Fed cuts bank rate to boost confidence

By Demetri Sevastopulo in Washington


Published: March 17 2008 01:42 | Last updated: March 17 2008 01:42

The Federal Reserve on Sunday cut the discount rate for banks by 25 basis points to 3.25 per cent and created a new lending facility for other financial institutions in an attempt to boost market liquidity.

In announcing the surprise move, Ben Bernanke, chairman of the US central bank, said the Fed and Treasury were “working to promote liquid, well-functioning financial markets, which are essential for economic growth”.

“First, we have introduced a special lending facility that will provide liquidity to primary dealers at terms similar to those available to banks at the discount window,” said Mr Bernanke.

“Second, we reduced the discount rate by ¼ per cent and increased the maximum maturity of discount window loans to 90 days. These steps will provide financial institutions with greater assurance of access to funds.”

Separately, the Fed agreed to fund up to $30bn (£15bn) to help JPMorgan complete its planned purchase of Bear Stearns, a deal that was finalised on Sunday.

Timothy Geithner, president of the New York Fed, said the moves were “designed to help get liquidity to where it can help play an appropriate role . . . to address a range of challenges”.

The Fed said the new lending facility would be available for at least six months, and possibly longer depending on market conditions. The credit provided under the new facility would be collateralised by investment grade debt securities, and would be charged the same rate as the discount rate.

Senior Fed officials described the surprise action as a broad arrangement to reduce risk across the system.

They dismissed suggestions that it was aimed at preventing a situation where they might have to rescue other investment banks, as they did with Bear Stearns last week.

One official said the move was an offensive, not defensive, action aimed at helping the market system.

Before the Fed announced its actions on Sunday night, Hank Paulson, US Treasury secretary, had defended last week’s move to rescue Bear Stearns. He added that the government would take whatever actions were necessary to ensure the stability of the US financial system.

Mr Paulson said he was convinced the Fed’s move to provide emergency funding to the stricken investment bank was the “right decision” even though he recognised the risk of moral hazard.

“You need to balance these two considerations,” Mr Paulson told Fox News. “At this time, given where we are, and given how important it is to minimise disruptions in our capital markets, and how important it is to protect the economy . . . this was the right decision.”

The Treasury secretary declined to say whether the government would be prepared to rescue any other investment banks that ran into similar difficulties, but stressed that the “number one priority” was the stability of the US financial system.


The Road to Hyperinflation- Vive La France!

Economics / Stagflation Mar 14, 2008 - 03:36 PM

By: Peter Schiff


This week, as the financial sector began to give way under the unbearable weight of bad mortgage debt, the Federal Reserve stepped in to save the day. At least that's what it says in the script.

In a surprise move, the Federal Reserve announced its intention to swap $200 billion of treasury debt for $200 billion of potentially worthless mortgage-backed securities.

The Fed may have been partially spurred to take the step as a result of the rapid collapse of Carlyle Capital Corp. a publicly traded private equity firm that is a subsidiary of the Carlyle Group.

The Dutch firm could not meet margin calls on its depreciating collateral of AAA-rated mortgaged-backed securities guaranteed by Fannie Mae and Freddie Mac.

On Friday, the Fed then took the unusual step of providing emergency “non-recourse” funding to Bear Stearns, collateralized by that firm's similarly worthless mortgage debt. Apparently the Fed now stands willing to assume any mortgage-related risk that no other private entity would touch.

That the Fed would take such extreme measures, which would have been considered unthinkable even a few months ago, followed a few notable media events that may have affected their thinking.

On Monday, Wall Street was rocked by an article in Barron's that suggested that government sponsored lenders Fannie Mae and Freddie Mac lacked sufficient capital to cover the likely losses on the $5 trillion in mortgages they insure (a position that I have taken for years) and raised the possibility of either bankruptcy or a government bailout.

On CNBC the next day, Paul McCulley, the managing director at Pimco, the world's largest bond fund, publicly called for the Fed to use it balance sheet and its printing press to buy mortgages.

According to the Fed, its new plan does not amount to buying mortgages but simply accepting them as collateral for 28-day loans.

However, will the Fed really return these ticking time bombs to their true owners in 28 days, inciting the very collapse its actions were originally designed to postpone?

Why does the Fed believe that the mortgages will be marketable next month; or the month after that?

Nor can we believe that such “loans” will be restricted to only $200 billion.

Bear Stearns and Carlyle are certainly not alone in massive exposure to bad debt.

Given the unprecedented leverage that many of the biggest financial firms used to play in this market, there will be many more failures to come.

Does the Fed stand ready to bail out all comers? Based on this course of action, the Fed, or more precisely American citizens, will end up with trillions, not billions, of such securities on its books.

The problem with these mortgages (other than the borrowers lacking any means or desire to repay them) is that the underlying collateral is worth a fraction of the face amount.

With recent foreclosure recovery rates amounting to less than 50 cents on the dollar, it is no wonder that no one wants them.

The real estate bubble allowed borrowers to leverage themselves to the hilt using inflated home values as collateral. However, now that the bubble has burst, mortgage balances far exceed current property values.

It is a trillion dollar time bomb that no one can possible [sic] defuse.

Paper dollars are technically Federal Reserve Notes, which means they are liabilities of the Fed. When it puts newly minted notes into circulation it does so by buying assets, usually U.S. treasuries, which it then holds on its balance sheet to offset that liability. By swapping treasuries for mortgages, the Fed effectively alters the compilation of its balance sheet and the backing of its notes.

However, backing paper money with mortgages is nothing new.

The French tried it in the late 18th Century, and it lead to hyperinflation.

Assignats, which were first issued in 1790 to help finance the French revolution, were backed by mortgages on confiscated church properties.

Although the stolen underlying collateral did have some value, the revolutionaries saw no reason to limit how many Assignats were printed, which resulted in massive depreciation.

Within three years, price controls were introduced and failure to accept Assignats, initially an offence subject to six years in prison, was made a capital crime. By 1799 the currency was completely worthless.

If even the threat of death could not prop up the Assignat, does anyone believe that the currency could have been saved if Robespierre had forcefully mouthed a “strong Assignat policy” as President Bush is now doing with the dollar?

Rather than repeating the mistakes of history we should learn from them. Our own failed experiment with the Continental currency as well as the Great Depression should prove conclusively that it is Austrian, and not French, economics we should be following.


US Banking System in a Vicious Circle Ending In Systemic Financial Meltdown


"It's another round of the credit crisis. Some markets are getting worse than January this time. There is fear that something dramatic will happen and that fear is feeding itself," Jesper Fischer-Nielsen, interest rate strategist at Danske Bank, Copenhagen; Reuters

Wednesday's action by the Federal Reserve proves that the banking system is insolvent and the US economy is at the brink of collapse.

It also shows that the Fed is willing to intervene directly in the stock market if it keeps equities propped up. This is clearly a violation of its mandate and runs contrary to the basic tenets of a free market. Investors who shorted the market yesterday, got clobbered by the not so invisible hand of the Fed chief.

n his prepared statement, Bernanke announced that the Fed would add $200 billion to the financial system to shore up banks that have been battered by mortgage-related losses. The news was greeted with jubilation on Wall Street where traders sent stocks skyrocketing by 416 points, their biggest one-day gain in five years.

“It's like they're putting jumper cables onto a battery to kick-start the credit market,'' said Nick Raich, a manager at National City Private Client Group in Cleveland. ``They're doing their best to try to restore confidence.''

“Confidence”? Is that what it's called when the system is bailed out by Sugar-daddy Bernanke?

To understand the real meaning behind the Fed's action; it's worth considering some of the stories which popped up in the business news just days earlier. For example, last Friday, the International Herald Tribune reported: “Tight money markets, tumbling stocks and the dollar are expected to heighten worries for investors this week as pressure mounts on central banks facing what looks like the “third wave” of a global credit crisis....Money markets tightened to levels not seen since December, when year-end funding problems pushed lending costs higher across the board.”

The Herald Tribune said that troubles in the credit markets had pushed the stock market down more than 3 percent in a week and that the same conditions which preceded the last two crises (in August and December) were back stronger than ever.

In other words, liquidity was vanishing from the system and the market was headed for a crash.

A report in Reuters reiterated the same ominous prediction of a “third wave” saying: “The two-year U.S. Treasury yields hit a 4-year low below 1.5 percent as investors flocked to safe-haven government bonds....The cost of corporate bond insurance hit record highs on Friday and parts of the debt market which had previously escaped the turmoil are also getting hit.”

Risk premiums were soaring and investors were fleeing stocks and bonds for the safety of government Treasuries; another sure sign that liquidity was disappearing.

Reuters: "The level of financial stress is ... likely to continue to fuel speculation of more immediate central bank action either in the form of increased liquidity injections or an early rate cut," Goldman Sachs said in a note to clients.”

Indeed. When there's a funding-freeze by lenders, investors hit the exits as fast as their feet will carry them. That's why the lights started blinking red at the Federal Reserve and Bernanke concocted a plan to add $200 billion to the listing banking system.

New York Times columnist Paul Krugman also referred to a “third wave” in his article “The Face-Slap Theory”. According to Krugman, “The Fed has been cutting the interest rate it controls - the so-called Fed funds rate – (but) the rates that matter most directly to the economy, including rates on mortgages and corporate bonds, have been rising. And that's sure to worsen the economic downturn.”...(Now) “the banks and other market players who took on too much risk are all trying to get out of unsafe investments at the same time, causing significant collateral damage to market functioning.” What the Times' columnist is describing is a run on the financial system and the onset of “a full-fledged financial panic.”

The point is, Bernanke's latest scheme is not a remedy for the trillion dollar unwinding of bad bets. It is merely a quick-fix to avoid a bloody stock market crash brought on by prevailing conditions in the credit markets.

Bernanke coordinated the action with the other members of the global banking cartel---The Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank---and cobbled together the new Term Securities Lending Facility (TSLF), which “will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally.” (Fed statement)

The plan, of course, is wildly inflationary and will put additional downward pressure on the anemic dollar. No matter. All of the Fed's tools are implicitly inflationary anyway, but they'll all be put to use before the current crisis is over.

The Fed's statement continues: “The Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008.”

So, why is the Fed issuing loans to foreign banks? Isn't that a tacit admission of its guilt in the trillion dollar subprime swindle? Or is it simply a way of warding off litigation from angry foreign investors who know they were cheated with worthless toxic bonds? In any event, the Fed's largess proves that the G-10 operates as de facto cartel determining monetary policy for much of the world. (The G-10 represents roughly 85% of global GDP)

As for Bernanke's Term Securities Lending Facility (TSLF) it is intentionally designed to circumvent the Fed's mandate to only take top-grade collateral in exchange for loans. No one believes that these triple A mortgage-backed securities are worth more than $.70 on the dollar. In fact, according to a report in Bloomberg News yesterday: “AAA debt fell as low as 61 cents on the dollar after record home foreclosures and a decline to AA may push the value of the debt to 26 cents, according to Credit Suisse Group.

``The fact that they've kept those ratings where they are is laughable,'' said Kyle Bass, chief executive officer of Hayman Capital Partners, a Dallas-based hedge fund that made $500 million last year betting lower-rated subprime-mortgage bonds would decline in value. ``Downgrades of AAA and AA bonds are imminent, and they're going to be significant.'' Bass estimates most of AAA subprime bonds in the ABX indexes will be cut by an average of six or seven levels within six weeks.” (Bloomberg News) The Fed is accepting these garbage bonds at nearly full-value. Another gift from Santa Bernanke.

Additionally, the Fed is offering 28 day repos which --if this auction works like the Fed's other facility, the TAF---the loans can be rolled over free of charge for another 28 days. Yippee. The Fed found a way to recapitalize the banks with permanent rotating loans and the public is none the wiser. The capital-starved banksters at Citi and Merrill must feel like they just won the lottery. Unfortunately, Bernanke's move effectively nationalizes the banks and makes them entirely dependent on the Fed's fickle generosity.

The New York Times Floyd Norris sums up Bernanke's efforts like this: “The Fed's moves today and last Friday are a direct effort to counter a loss of liquidity in mortgage-backed securities, including those backed by Fannie Mae and Freddie Mac. Given the implied government guarantee of Freddie and Fannie, rising yields in their paper served as a warning sign that the crunch was worsening and investor confidence was waning. On Oct. 30, the day before the Fed cut the Fed funds rate from 4.75 percent to 4.5 percent, the yield on Fannie Mae securities was 5.75 percent. Today the Fed Funds rate is 3 percent, and the Fannie Mae rate is 5.71 percent, virtually the same as in October.....A sign of the Fed's success, or lack of same, will be visible in that rate. It needs to come down sharply, in line with Treasury bond rates. Today, the rate was up for most of the day, but it did fall back at the end of the day. Watch that rate for the rest of the week to see indications of whether the Fed's move is really working to restore confidence.”

Norris is right; it all depends on whether rates go down and whether that will rev-up the moribund housing market again. Of course, that is predicated on the false assumption that consumers are too stupid to know that housing is in its biggest decline since the Great Depression. This is just another slight miscalculation by the blinkered Fed. Housing will not be resuscitated anytime in the near future, no matter what the conditions; and you can bet on that. The last time Bernanke cut interest rates by 75 basis points mortgage rates on the 30-year fixed actually went up a full percentage point. This had a negative affect on refinancing as well as new home purchases. The cuts were a total bust in terms of home sales.

Still, equities traders love Bernanke's antics and, for the next 24 hours or so, he'll be praised for acting decisively. But as more people reflect on this latest manuver, they'll see it for what it really is; a sign of panic. Even more worrisome is the fact that Bernanke is quickly using every arrow in his quiver. Despite the mistaken belief that the Fed can print money whenever it chooses; there are balance sheets constraints; the Fed's largess is finite.

According to MarketWatch:" Counting the currency swaps with the foreign central banks, the Fed has now committed more than half of its combined securities and loan portfolio of $832 billion, Lou Crandall, chief economist for Wrightson ICAP noted. 'The Fed won't have run completely out of ammunition after these operations, but it is reaching deeper into its balance sheet than before. "

Steve Waldman at interfluidity draws the same conclusion in his latest post: “After the FAF expansion, repo program, and TSLF, the Fed will have between $300B and $400B in remaining sterilization capacity, unless it issues bonds directly.” (Calculated Risk) So, Bernanke is running short of ammo and the housing bust has just begun. That's bad. As the wave of foreclosures, credit card defaults and commercial real estate bankruptcies continue to mount; Bernanke's bag o' tricks will be near empty having frittered most of his capital away on his Beluga-munching buddies at the investment banks. But that's only half the story. Bernanke and Co. are already working on a new list of hyper-inflationary remedies once the credit troubles pop up again.

According to the Wall Street Journal, the Fed has other economy-busting scams up its sleeve:“With worsening strains in credit market threatening to deepen and prolong an incipient recession, analysts are speculating that the Federal Reserve may be forced to consider more innovative responses -– perhaps buying mortgage-backed securities directly.

“As credit stresses intensify, the possibility of unconventional policy options by the Fed has gained considerable interest, said Michael Feroli of J.P. Morgan Chase. He said two options are garnering particular attention on Wall Street: Direct Fed lending to financial institutions other than banks and direct Fed purchases of debt of Fannie Mae and Freddie Mac or mortgage-backed securities guaranteed by the two shareholder-owned, government-sponsored mortgage companies. ( “Rate Cuts may not be Enough”, David Wessel, Wall Street Journal)

Wonderful. So now the Fed is planning to expand its mandate and bail out investment banks, hedge funds, brokerage houses and probably every other brandy-swilling Harvard grad who got caught-short in the subprime mousetrap. Ain't the “free market” great?

But none of Bernanke's bailout schemes will succeed. In fact, all he's doing is destroying the currency by trying to reflate the equity bubble. And how much damage is he inflicting on the dollar? According to Bloomberg, “the risk of losses on US Treasury notes exceeded German bunds for the first time ever amid investor concern the subprime mortgage crisis is sapping government reserves....Support for troubled financial institutions in the U.S. will be perceived as a weakening of U.S. sovereign credit.''

America is going broke and the rest of the world knows it. Bernanke is just speeding the country along the ever-steepening downward trajectory.

Timothy Geithner, President of the New York Fed put it like this: “ The self-reinforcing dynamic within financial markets has intensified the downside risks to growth for an economy that is already confronting a very substantial adjustment in housing and the possibility of a significant rise in household savings. The intensity of the crisis is in part a function of the size of the preceding financial boom, but also of the speed of the deterioration in confidence about the prospects for growth and in some of the basic features of our financial markets. The damage to confidence—confidence in ratings, in valuation tools, in the capacity of investors to evaluate risk—will prolong the process of adjustment in markets. This process carries with it risks to the broader economy.”

Without a hint of irony, Geithner talks about the importance of building confidence on a day when the Fed has deliberately distorted the market by injecting $200 billion in the banking system and sending the flagging stock market into a steroid-induced rapture. Astonishing.

The stock market was headed for a crash this week, but Bernanke managed to swerve off the road and avoid a head-on collision.

But nothing has changed.

Foreclosures are still soaring, the credit markets are still frozen, and capital is being destroyed at a faster pace than any time in history.

The economic situation continues to deteriorate and even unrelated parts of the markets have now been infected with subprime contagion.

The massive deleveraging of the banks and hedge funds is beginning to intensify and will continue to accelerate until a bottom is found. That's a long way off and the road ahead is full of potholes.

"In the United States, a new tipping point will translate into a collapse of the real economy, final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the US dollar fall.

The collapse of US real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down massively.” (Statement from The Global Europe Anticipation Bulletin (GEAB)

Is that too gloomy? Then take a look at these eye-popping charts which show the extent of the Fed's lending operations via the Temporary Auction Facility. The loans have helped to make the insolvent banks look healthy, but at great cost to the country's economic welfare. http://benbittrolff.blogspot.com/2008/03/really-scary-fed-charts-march.html

The Fed established the TAF in the first place; to put a floor under mortgage-backed securities and other subprime junk so the banks wouldn't have to try to sell them into an illiquid market at fire-sale prices.

But the plan has backfired and now the Fed feels compelled to contribute $200 billion to a losing cause.

It's a waste of time.

UBS puts the banks total losses from the subprime fiasco at $600 billion. If that's true, (and we expect it is) then the Fed is out of luck because, at some point, Bernanke will have to throw in the towel and let some of the bigger banks fail. And when that happens, the stock market will start lurching downward in 400 and 500 point increments. But what else can be done? Solvency can only be feigned for so long. Eventually, losses have to be accounted for and businesses have to fail. It's that simple.

So far, the Fed's actions have had only a marginal affect [sic].

The system is grinding to a standstill.

The country's two largest GSEs, Fannie Mae and Freddie Mac, which are presently carrying $4.5 trillion of loans on their books, are teetering towards bankruptcy.

Both are gravely under-capitalized and (as a recent article in Barron's shows) Fannies equity is mostly smoke and mirrors. No wonder investors are shunning their bonds. Additionally, the cost of corporate bond insurance is now higher than anytime in history, which makes funding for business expansion or new projects nearly impossible.

The wheels have come of the cart. The debt markets are upside-down, consumer confidence is drooping and, as the Financial Times states, “A palpable sense of crisis pervades global trading floors.” It's all pretty grim.

The banks are facing a “systemic margin call” which is leaving them capital-depleted and unwilling to lend.

Thus, the credit markets are shutting down and there's a stampede for the exits by the big players.

Bernanke's chances of reversing the trend are nil.

The cash-strapped banks are calling in loans from the hedge funds which is causing massive deleveraging. That, in turn, is triggering a disorderly unwind of trillions of dollars of credit default swaps and other leveraged bets.

Its a disaster.

Economist Nouriel Roubini predicted the whole sequence of events six months before the credit markets seized and the Great Unwind began”.

Here's a sampling of his recent testimony before Congress:

“There is now a rising probability of a "catastrophic" financial and economic outcome; a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.

The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown....Capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market [sic] actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy.

Market prices include a large illiquidity discount on top of the discount due to the credit and fundamental problems of the underlying assets that are backing the distressed financial assets. Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions.

Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit.

To understand the risks that the financial system is facing today I present the "nightmare" or "catastrophic" scenario that the Fed and financial officials around the world are now worried about. Such a scenario – however extreme – has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.”

Roubini has been right from the very beginning, and he is right again now. Bernanke can place himself at the water's edge and lift his hands in defiance, but the tide will come in and wash him out to sea anyway. The market is correcting and nothing is going to stop it.

By Mike Whitney


Betting the Bank

Published: March 14, 2008

Op-Ed Columnist


Four years ago, an academic economist named Ben Bernanke co-authored a technical paper that could have been titled “Things the Federal Reserve Might Try if It’s Desperate” — although that may not have been obvious from its actual title, “Monetary Policy Alternatives at the Zero Bound: An Empirical Investigation.”

Today, the Fed is indeed desperate, and Mr. Bernanke, as its chairman, is putting some of the paper’s suggestions into effect. Unfortunately, however, the Bernanke Fed’s actions — even though they’re unprecedented in their scope — probably won’t be enough to halt the economy’s downward spiral.

And if I’m right about that, there’s another implication: the ugly economics of the financial crisis will soon create some ugly politics, too.

To understand what’s going on, you have to know a bit about how monetary policy usually operates.

The Fed’s economic power rests on the fact that it’s the only institution with the right to add to the “monetary base”: pieces of green paper bearing portraits of dead presidents, plus deposits that private banks hold at the Fed and can convert into green paper at will.

When the Fed is worried about the state of the economy, it basically responds by printing more of that green paper, and using it to buy bonds from banks. The banks then use the green paper to make more loans, which causes businesses and households to spend more, and the economy expands.

This process can be almost magical in its effects: a committee in Washington gives some technical instructions to a trading desk in New York, and just like that, the economy creates millions of jobs.

But sometimes the magic doesn’t work. And this is one of those times.

These days, it’s rare to get through a week without hearing about another financial disaster. Some of this is unavoidable: there’s nothing Mr. Bernanke can or should do to prevent people who bet on ever-rising house prices from losing money.

But the Fed is trying to contain the damage from the collapse of the housing bubble, keeping it from causing a deep recession or wrecking financial markets that had nothing to do with housing.

So Mr. Bernanke and his colleagues have been doing the usual thing: printing up green paper and using it to buy bonds. Unfortunately, the policy isn’t having much effect on the things that matter. Interest rates on government bonds are down — but financial chaos has made banks unwilling to take risks, and it’s getting harder, not easier, for businesses to borrow money.

As a result, the Fed’s attempt to avert a recession has almost certainly failed. And each new piece of economic data — like the news that retail sales fell last month — adds to fears that the recession will be both deep and long.

So now the Fed is following one of the options suggested in that 2004 paper, which was about things to do when conventional monetary policy isn’t getting any traction. Instead of following its usual practice of buying only safe U.S. government debt, the Fed announced this week that it would put $400 billion — almost half its available funds — into other stuff, including bonds backed by, yes, home mortgages. The hope is that this will stabilize markets and end the panic.

Officially, the Fed won’t be buying mortgage-backed securities outright: it’s only accepting them as collateral in return for loans. But it’s definitely taking on some mortgage risk. Is this, to some extent, a bailout for banks? Yes.

Still, that’s not what has me worried. I’m more concerned that despite the extraordinary scale of Mr. Bernanke’s action — to my knowledge, no advanced-country’s central bank has ever exposed itself to this much market risk — the Fed still won’t manage to get a grip on the economy. You see, $400 billion sounds like a lot, but it’s still small compared with the problem.

Indeed, early returns from the credit markets have been disappointing. Indicators of financial stress like the “TED spread” (don’t ask) are a little better than they were before the Fed’s announcement — but not much, and things have by no means returned to normal.

What if this initiative fails? I’m sure that Mr. Bernanke and his colleagues are frantically considering other actions that they can take, but there’s only so much the Fed — whose resources are limited, and whose mandate doesn’t extend to rescuing the whole financial system — can do when faced with what looks increasingly like one of history’s great financial crises.

The next steps will be up to the politicians.

I used to think that the major issues facing the next president would be how to get out of Iraq and what to do about health care.

At this point, however, I suspect that the biggest problem for the next administration will be figuring out which parts of the financial system to bail out, how to pay the cleanup bills and how to explain what it’s doing to an angry public.

Fancy a change of career?


Welcome to Bear Stearns. If you're really good at what you do, you probably have a lot of choices when it comes to taking the next step in (or starting) your career. But if you can tackle complex challenges with creative solutions, and want to be able to make your mark quickly regardless of title or tenure, we think your only real choice is pretty clear.

Why let someone else drive your career? Call your own shots and create your own success–however you define it–with us.


Oh, the irony. Now listen to this analyst speaking on 5th August 2007. Note his predictions about gold and oil prices. He knows his stuff. Damn he's good:



And just look at how the market has reacted to the BSC bailout. Ouch.


Lehman Brothers, Goldman Sachs and Morgan Stanley could be next:


You Aren’t Misreading. Bear Stearns Is Worth $2 a Share


March 16, 2008, 8:41 pm

Posted by Dennis K. Berman

That means $236 million. Effectively zero. And with J.P. Morgan’s risk somewhat limited by the Fed, which is taking the extraordinary step of funding up to $30 billion of Bear Stearns’ less-liquid assets.

This is what they call on the Street “going donuts.” But there is nothing sweet about the thousands of employees who have lost much of their life savings and most likely their jobs, too.

The $2 per share basically sets down an important market marker: For now, being a Wall Street trading house is no longer a license to print money. It’s a license to absorb plenty of risks. Risks so presumably so toxic and unknown that J.P. Morgan had to turn to the Fed in the way it did.

The Fed responded by broadly opening its window to non-depository institutions, the kinds of trading houses such as Lehman, Goldman Sachs, and Morgan Stanley that could each be picked off by a similar a run on the bank. Unprecedented as they are, the Fed’s moves should give the market some comfort Monday morning.

But as the market saw with Bear, the moment you have to convince someone your credit is good is the moment it’s perceived not to be.

Which perception will prevail in the market? Are the dealers extra protected? Or extra vulnerable? Monday’s markets are going to be an incredible laboratory for finding out.

Well, it's Monday now. Watch out.

atm Exclamation
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PostPosted: Mon Mar 17, 2008 4:37 am    Post subject: Reply with quote


Bear sale sparks global equity and dollar sell-off


By Neil Dennis

Published: March 17 2008 08:32 | Last updated: March 17 2008 08:32

Equity markets and the dollar sold off sharply on Monday, driving investors into the safe havens of gold and Treasury bonds, as the rescue of stricken investment bank Bear Stearns sparked fears of further financial sector strife.

JPMorgan Chase bought Bear Stearns for $2 a share, a 93 per cent discount to Friday’s closing price, and agreed to take on up to €30bn of Bear’s mortgage-backed securities.

The move came as the Federal Reserve announced it was cutting the discount rate at which it lends to banks by 25 basis points to 3.25 per cent.

Aimed at helping to restore confidence to financial markets, the moves instead raised fears that there could be more victims like Bear Stearns.

The cost of protecting European corporate bonds from default rose sharply. The iTraxx Crossover index of a basket of mostly junk-rated bonds, rose 45 basis points to 670.

”Given that Bear has been rescued by selling it at such a huge discount, the market will assume its balance sheet was seriously and fundamentally impaired, and concerns could rise that other institutions might be in a similar predicament,” said Marco Annunziata, chief economist at UniCredit.

The dollar tumbled to new lows against most currencies as markets increasingly priced in the likelihood of a 100-basis-points cut in the main Fed funds rate when the US central bank meets on Tuesday.

The euro moved to a new record at $1.5904, up 1.5 per cent from Friday’s close. The dollar fell 2.5 per cent against the Swiss franc to a record low of SFr0.9737 as the franc’s safe-haven appeal came to the fore. The Japanese yen rose to a new 12-year high against the US currency to Y95.77, up 3.2 per cent, with its low yield also acting as a buffer against risk.

Sterling was the only leading currency not to rise against the dollar as investors feared problems in the UK’s own financial sector. The pound edged 0.1 per cent lower to $2.0159.

The falling dollar hit equity markets, already plagued by fears of financial sector meltdown, as manufacturers watched the value of their exports to the US decline.

The FTSE Eurofirst 300 opened 2.5 per cent lower at 1,223.16, with Swiss bank UBS leading the decline, down 10.7 per cent. Outside the financial sector, German engineering group Siemens fell 10 per cent after a profit warning.

London’s FTSE 100 fell 2 per cent while in Frankfurt’s Xetra Dax fell 3 per cent and the CAC 40 in Paris lost 2.6 per cent.

In Tokyo, carmakers and banks drove the Nikkei 225 down by 3.7 per cent to 11,787.51. Hong Kong’s Hang Seng index lost 5.2 per cent and India’s Sensex index lost 5.1 per cent.

Records continued to fall in the commodities market as investors sought refuge from equity volatility in precious metals and oil. The dollar’s slide also made commodities priced in the US currency more attractive.

Gold rose to a record $1,030.80 an ounce, while US crude oil rose to a new high of $111.80 a barrel.

The flight to safety ensured government bonds rose and forced yields sharply lower. The yield on the 10-year US Treasury fell 12.3 basis points to 3.34 per cent, while the two-year yield fell 15.7basis points to 1.31 per cent.

Black Monday Part II. Saint Patrick help US.

atm not Shocked ed
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PostPosted: Mon Mar 17, 2008 11:03 am    Post subject: Reply with quote

Gary predicts:
Fascinating. I think it's time to stock up on canned goods.

Well, not a bad idea to do that. If hedging is a sport in the financial world, this one in the citizen's world is a far better bet. What do you have to lose? Eventually, you'll eat it - but at least it's food. Sound investment idea to me. (Being a little cheaky here, but I'm actually fucking seriously contemplating buying canned goods, for realsies.)

Hey ATM, this stuff is either keeping you up all hours of the night, or you are somewhere in the eastern world. Whatever, but I'm here in the US and it's keeping me up all hours of the night, indeed.

Your quoted newsclips are more genuine than the soundbites, tho teeter-tottering on truth, on mainstream TV stations. Something a bit more somber are the international broadcasts versus American broadcasts and cable... but of course, their PTB hold 'em back from giving flat-out commentary.

Most of my upbringing was centered around European historical info in my upbringing, but lately, with my new gf's Dad having been around during the US Great Depression and their family having been investment property owners-gone-bust in Wash, DC, they give me a lot of practical comparisons which they see vividly happening today.
Personally, I've been trained to be skeptical of news from childhood, because I was taught early in life what the value of propaganda is to those with money and in control of information.
The citizens of the USA have been BS'd into thinking that this phenomenon of propaganda only exists in communist countries.

Hahahahaha... welcome to Sales 101. Works same in every language.


just cos things are fucked up doesn't mean it isn't progress...
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PostPosted: Mon Mar 17, 2008 11:23 am    Post subject: Reply with quote

Another vote of confidence for Dogtor Symes milk-free diet:

I drink rice and almond milk now, and both are shelf-storable, no refrigeration needed. I can stock up on as much as I want.

"No matter what happens, ever... there's ALWAYS at least one reason. And the top reason is ALWAYS money."
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Posts: 573

PostPosted: Mon Mar 17, 2008 11:37 am    Post subject: Reply with quote

I fear we may see more to come.
Look for Lehman Brothers as a the next potential crisis.

P.S. Rumpl4Skin:
Had some rice milk yesterday, a friend blended it with banana, fresh peanut butter and blueberries. It rocked.
She was attempting to stop me from buying a chocolate bar and it worked.


"Fear is the passion of slaves."
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PostPosted: Mon Mar 17, 2008 11:55 am    Post subject: Reply with quote

~Slick financial cannibalism alert~

JP FUCKING MORGAN !! Gimmie a break.

Unless Bear execs were lying at levels which will end them in prison
(which I seriously doubt), then this is one heckuva slick operation.

Yeah, we all know there are high level structural problems with the US
financial systems, but it was rumors which caused a run on Bear Stearns.
That's all. And when you get a run, no bank can hold the line --no matter
what the state of it's balance sheet.

So who pushed the rumors on Bear Stearns? And was this engineered so
that the hype would climax just ahead of the weekend --so that this deal
could be forced through in a weekend crisis atmosphere?

When the dust settles, and a floor is put under the structural position, it seems
that the very, very, VERY well connected JP Morgan will be looking good:
having bought Bear Stearns for virtually nothing.

The ones who profit in this kind of situation are those with deep pockets.

An unholy alliance has created a new financial entity called JP FED Morgan.

Now that what I call DEEP pocket. Yeah...

~Slick financial cannibalism alert~
~This ain't even nearly over~

Stunned Bear Stearns investors eye legal claims

Mon Mar 17, 2008 11:46am EDT - By Martha Graybow

NEW YORK (Reuters) - Angry Bear Stearns Co Inc shareholders have wasted no time in calling their lawyers to pursue potential legal recourse over the company's $2-a-share fire sale to JPMorgan Chase & Co.

"I can't divulge privileged conversations, but shareholders don't contact me when they are happy with the way things are going with their investments," said Ira Press, a lawyer at class-action firm Kirby McInerney, which has spoken with dismayed Bear investors about the matter.

"This is a stock that has gone from 50 to 2 literally overnight, and I also know of people who had assumed that the worst had passed when it closed at 30," he said.

Bear Stearns, one of the most venerable names on Wall Street, is being sold for just $236 million in an emergency deal backed by the U.S. Federal Reserve in a sign of the deepening credit crisis.

The deal's value is more than 90 percent below the company's Friday closing share price of $30.85. But JPMorgan said the total price tag would be $6 billion to account for litigation and severance costs.

Investors have barely had time to digest the news, but are already exploring possible legal avenues, say plaintiffs' lawyers who specialize in suing large corporations.

"We've been contacted by large individual investors and institutional investors," said Jeffrey Nobel, a partner at class-action law firm Schatz Nobel Izard. "Suffice to say, we are certainly looking very carefully at it."

Shareholders might sue Bear and its executives and officers for securities fraud, contending they failed to disclose the company's true financial health, lawyers say.

Nobel said his firm has been contacted by investors who bought the stock as recently as last week. Some of these buyers, he said, took their positions after Bear CEO Alan Schwartz said in a televised interview on Wednesday that the company does not see any pressure on its liquidity and had about $17 billion in excess cash on its balance sheet.

"You have investors who are upset because they feel as though the company was not truthful in reporting its financial condition," Nobel said.

Other suits may be brought by Bear employees who hold company shares that are now virtually worthless, lawyers said.

Another possibility are lawsuits challenging the fairness of the deal and whether there are other potential bidders who might pay a higher price, though these suits may have a tough time succeeding because Bear was clearly in dire straits when it agreed to the weekend deal and may have had no other options besides bankruptcy, lawyers said.

Salvatore Graziano, a partner at plaintiffs' firm Bernstein Litowitz Berger & Grossmann, said he and his colleagues also have been discussing the matter with clients.

""It's a fluid situation," he said. "Clearly, we're very focused on it."


Minds are like parachutes.
They only function when open.
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