3 ms·
Somebody set us up the moneybomb! All your basis points are belong to us. Bear is an investment bank, and does not have direct access to borrow money from the
by aristus 19y ago
Somebody set us up the moneybomb!
All your basis points are belong to us.
Bear is an investment bank, and does not have direct access to borrow money from the Fed. Lat week JP agreed to act as a kind of conduit for loans backed by some of Bear's more toxic assets.
Sounds stinky, eh? The thing is that the Fed and everyone else is scared stiff that Bear would default. That would set of a ricochet all through the banking and trading system. This buyout is actually the lesser of two evils, and the price is so low because no one really knows what liabilities and losses are to come.
- mk 19y agoLet me get this straight. JP is taking a loan from the Fed to buy Bear?
- aristus 19y agoYes & No. JP is buying Bear with its own cash. It's only $230-odd million. The Fed allowed an unusual transaction in which $30B of Bear's toxic assets were put up as collateral for Fed loans in order to keep its (Bear's) operations and trades going. The Fed took some of the pressure off of Bear's balance sheet to make it more attractive to JP and reduce the damage to JP's balance sheet once the entities merge. Bear: "Mein Leiben!" Fed: "Holy sh*t, this can't happen! You, JP! You hold a lot of Bear's paper already. We need your help, and we'll sweeten the deal, ok?" JP: "I'm gonna make you an offer you can't possibly refuse..."
- aneesh 19y agoNo loan, but if things go badly and JP can't back Bear's bad loans, the Fed has got their back.
- dpapathanasiou 19y agoBear is an investment bank, and does not have direct access to borrow money from the Fed. Ah, but under "emergency measures" announced today by the Fed, securities dealers (for at least the next six months, anyway) may borrow from the Fed on much the same terms as banks.
- mixmax 19y agoUnfortunately for Bear these emergency mearures were only enacted today, and Bear needed the money on friday. Lousy timing...
- dpapathanasiou 19y agoWell, the sale to JPM was probably already a done deal at that point. It seems these measures are because there are probably other Bears out there, but not enough JPMs to save them all.
- mixmax 19y agoI'm pretty sure that the sale wasn't a done deal on friday. The problem didn't get serious until friday morning, and thursday I think that nobody even suspected a firesale. Unrelated: what does your username mean? Is it a greek last name, something else, or just a random sequence of letters? Just curious...
- dpapathanasiou 19y agoI'm pretty sure that the sale wasn't a done deal on friday. The problem didn't get serious until friday morning, and thursday I think that nobody even suspected a firesale. Take a look at this timeline: http://online.wsj.com/article/SB120580966534444395.html?mod=hps_us_inside_today http://online.wsj.com/article/SB120580966534444395.html?mod=... Unrelated: what does your username mean? Is it a greek last name, something else, or just a random sequence of letters? Just curious... It's my first initial and last name (which, yes, is of Greek origin). Any more questions, Mr. Ixmax? ;)
- mixmax 19y agoHa ha, yes I'm sure I can think of something - your record for getting answers is pretty good ;-)
- ctkrohn 19y ago"All your basis points are belong to us." Pure genius. I will have to put this in my Bloomberg header.