Stocks Tumble On Plan To Aid Bear Stearns

Ailing Investment Bank Gets Financial Lifeline, But Move Troubles Investors About Overall Credit Woes

(CBS/AP)  Stocks have suffered another big drop Friday after The Federal Reserve invoked a rarely used Depression-era procedure to bolster troubled Bear Stearns Cos., touching off concerns about the severity of the credit market's overall troubles.

Friday's plan by the New York Federal Reserve and JP Morgan Chase & Co. offers Bear Stearns relief from a sudden liquidity crunch that analysts surmised could have felled the investment bank. But the company's position on the precipice of financial disaster has left many investors shaken and spoils some hopes that the moribund credit market is on the mend.

The Dow Jones industrial average has closed down about 194 points at the 11,951 level.

The action won praise from the administration, with President Bush saying that Fed Chairman Ben Bernanke was "doing a good job under tough circumstances."

Bernanke, delivering a speech later Friday, told a housing group he had had a "busy morning." He did not elaborate on the Fed's action regarding Bear Stearns.

"The Federal Reserve is monitoring market developments closely and will continue to provide liquidity as necessary to promote the orderly functioning of the financial system," the board said in its statement. It said members had voted unanimously to approve the arrangement, announced by JP Morgan Chase and Bear Stearns earlier.

Delivering a speech on the economy in New York, Bush voiced confidence in the Fed's actions to aggressively cut interest rates and the Fed announcement last week that it would supply up to $200 billion in loans to cash-strapped financial institutions.

"It was a strong action by the Fed and they did so because some financial institutions that borrowed money to buy securities in the housing industry must now repair their balance sheets before they can make further loans," Bush said. "Today's actions are fast moving, but the chairman of the Federal Reserve and the secretary of the treasury are on top of them and will take the appropriate steps to promote stability in our markets."

The investment bank, set to report earnings next Wednesday, was the largest underwriter of global mortgage-backed securities in 2007 and second only to Lehman Brothers in U.S. mortgage-backed securities, reports the Wall Street Journal.

CBS News anchor Katie Couric reports that there had been whispers of trouble at Bear Stearns - Wall Street's 5th biggest investment bank - for weeks. By Friday's opening bell, it was a full blown alarm: the 85-year-old investment bank was on the brink of a liquidity crisis.

"The danger of Bear Stearns having a liquidity crisis," Morningstar's Ryan Lentell told CBS News, "is that they could quickly be out of business."

Bear Stearns is heavily invested in complex financial instruments tied to risky subprime mortgages. As fears grew that the value of theseinvestments could plummet, other firms stopped pumping new money into Bear Stearns - or they cashed out.

The plan announced Friday will supply secured funding to Bear Stearns for an initial period of 28 days, seeking to provide short-term relief for the investment bank.

Senior Federal Reserve staffers said the arrangement allows JPMorgan Chase and Co. to borrow from the Fed's discount window and put up collateral from Bear Stearns to back up the loans.

"If they hadn't," said Harvard Business School professor Samuel Hayes, "this would have been a domino which would have probably caused other firms to go under as well."

JP Morgan, a bank, has access to the discount window to obtain direct loans from the Fed, but Bear Stearns, an investment house, does not.

This type of procedure, Fed officials said, dates back to the Great Depression of the 1930s but has rarely been used since that time.

In his speech, Bush said the administration had a plan to deal with the problems in credit and housing markets and said he opposed a number of measures pending in Congress to go further by allocating billions of dollars to purchase abandoned and foreclosed home and changing the bankruptcy code to allow judges to adjust mortgage terms.

However, Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the problems at Bearn Stearns, one of the country's largest investment banks, highlighed the need for more aggressive efforts.

"Instead of cheerleading and reacting with tepid measures, the administration should act boldly and decisively to prevent the looming foreclosure crisis from having catastrophic consequences for our economy and our markets," Dodd said in a statement.

Treasury Secretary Henry Paulson praised the Fed's leadership and said that the country's financial system would be able to weather the problems.

"As we have been saying for some time, there are challenges in our financial markets and we continue to address them," Paulson said in a statement. "This is another challenge that market participants and regulators are addressing. We are working closely with the Federal Reserve" and the Securities and Exchange Commission.

Paulson said he appreciated the leadership of the Fed "in enhancing the stability and orderliness of our markets."

The action by the Fed board in Washington represented an endorsement of a rescue effort for Bear Stearns that had already been arranged by JPMorgan and the Federal Reserve's New York regional bank.

It was seen as a last-ditch effort to save the investment bank, which on Friday acknowledged its serious financial problems after a week of denials.

JPMorgan Chase is providing an undisclosed amount of secured funding to Bear for 28 days, backstopped by the Federal Reserve Bank of New York.

The Securities and Exchange Commission issued a statement saying it has been "in close contact" with Treasury, the Federal Reserve and the Federal Reserve Bank of New York during discussions concerning an agreement by J.P. Morgan Chase & Co. to provide a secured loan facility to The Bear Stearns Companies.

But Couric reports, the financial rescue did nothing to keep Bear Stearns stock from falling more than 40 percent today, with one stock analyst predicting it could soon be worthless.

"The difficulty in a relationship, even in a financial relationship, trust is very important," UBS Financial Services' Arthur Cashin told Couric. "And when trust is shaken, it takes a while to get it back."

[shanev137]

Take over.

[culturechang]

Less than 10 years ago, they were ripping off investors (taxpayers). Now we are bailing them out.

[truthspeake2]

...I''d bet they didn''t take back any of those big bonu$e$ they gave out last year.

[shanev137]

Pretty soon the only US bank left will be the Bank of JPMorgan Chase Wachovia Wells of America

[truthspeake2]

Pretty soon the only US bank left will be the Bank of JPMorgan Chase Wachovia Wells of America
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Posted by shanev137 at 10:29 AM : Mar 14, 2008



...or the US China India Bank! USCHINDIA.

[timdgrim]

I''m facing major liquidity problems along with millions of Americans. Can we get the same deal on a bail out? Thought so.

[truthspeake2]

I''''m facing major liquidity problems along with millions of Americans. Can we get the same deal on a bail out? Thought so.
--------------------------------------------------------------------------------
Posted by timdgrim at 10:33 AM : Mar 14, 2008


Yeah sure you can, and it''s in the form of the new Bankruptcy Laws congress recently passed...

[mcvet]

It would appear that "Trickle Down" is trickling the WRONG way now wouldn''t it?? Sieg Heil Bush!!

[standlee5]

Let these bloody global banks fail and maybe they will learn to regulate themselves. We can all use small local credit unions and let these lowlife scumbag banks fall.

[standlee5]

House of cards.... and we''re all going to pay for their brazen business polcies.

[standlee5]

They''ve ignored good reputable customers and while recruiting any and all business regardless of risk. Let htem fall it''ll be better for those of us who acutally pay our bills, are credit worthy and responsible. As it is now, we''re paying for the high risk, our taxes pay for their programs and our high fees and interest rates pay for their defaults.

[shanev137]

It would appear that "Trickle Down" is trickling the WRONG way now wouldn''t it?? Sieg Heil Bush!!


-------


It''s called "Tricked On"....economics.

[jwind11]

Wikipedia

"The term BDS has been used in the political arena to describe a perceived tendency by some American liberals to blame President George W. Bush for virtually every ill in the world.[9][10] Another noted facet of BDS-like behavior is that it may appear to be a merely reflexive opposition to any position advocated by Bush for no other reason than that Bush happens to be advocating it.[11]

Krauthammer, a former psychiatrist who earned his M.D. from Harvard Medical School, defined BDS as "the acute onset of paranoia in otherwise normal people in reaction to the policies, the presidency %u2014 nay %u2014 the very existence of George W. Bush". The term reflects a belief that some criticisms of President Bush %u2014 for example, a description of him as the greatest current threat to American lives %u2014 are of emotional origins rather than based on facts or logic."



It does seem to describe many of the posters. I want Bush out too, but I don''''t have a psychotic obsession about the guy.


--------------------------------------------------------------------------------

Posted by Questionnews at 10:48 AM : Mar 14, 2008

[bogusbones]

make sure none of those wall street pigs take a reduction in wages - wouldn''t want to upset their delicate financial balance would we. bailout - ha. these guys make spitzer look like a choir boy for all the pain and suffering they cause. take care of your political contributors georgie boy.

[joyous88]

Let me just quess. Some more corporate welfare from the conservative government that can''t find enough money to give food stamps to poor kids or to give medical care to veterans? But they have plenty of credit with the chinese when they want to bail out
another wealthy corporation

[joyous88]

bring it on!

mission accomplished!

the surge is working!

we do not torture!

well not prisoners, we have been torturing the american people for eight years

[truthspeake2]

It does seem to describe many of the posters. I want Bush out too, but I don''''''''t have a psychotic obsession about the guy.
----------------------------------
----------------------------------------
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Posted by Questionnews at 10:48 AM : Mar 14, 2008


Don''t worry, we will politely knock on your door instead of kicking it down when we come for you....signed GW, the IRS, and the CIA.

The Patriot Act...and we approve this message!

[loublain]

harking back to other bailouts of high profile friends of the pres remember when lee iacocca of chrylser went hat in hand to the gov. and tom paxton wrote a song for the rest of us called "i''m changing my name to chrysler"???

[creeper00]

Let''s be clear about this. A Chase bailout of Bear Stearns is actually a bailout of George W. Bush.

Please remember whose administration got us into this mess.

[creeper00]

"harking back to other bailouts of high profile friends of the pres remember when lee iacocca of chrylser went hat in hand to the gov. and tom paxton wrote a song for the rest of us called "i''''m changing my name to chrysler"???"
Posted by loublain at 11:03 AM : Mar 14, 2008

Oh, give me a break. Chrysler didn''t just manipulate other people''s money. They actually MADE things.

Iacocca paid every penny back, months ahead of schedule, by actually producing something Americans would buy.

There''s no parallel here.

[pollroller1]

It''s a beautiful day in the neighborhood. Can you say depression?

[godofredo29]

Victims of the mortage crisis don''t get a life line, but the big financial institutions do! Feck that! Typical Bush (George H.W. and Geoge W.). As far as the banks and the airlines are concerned, the U.S. is a socialist state where these business don''t really have to worry about market forces.

[brianbwb-2009]

Funny, just yesterday, an article in the London Times interviewed European fund managers and brokers, who speculated that B.S. (how apropos the initials) would fail, the spokesman for B.S. said that the company was healthy, with over 17 billion in liquidity.

And the suckers still gamble in the stock market, they should play the illegal numbers, the game is just as rigged.

[pugster]

Government bailing Bear Sterns? The banks has been robbing us blind for years printing out money, controlling the fed and now running the economy to the ground.

[timdgrim]

Hold on people...our leader is about to speak big economy words in his address to some more of his buddies and let us know about his stra-teee-juh-ree.......His favorite word...UH! You''ll hear it at least a hundred times!

[pollroller1]

Ole President Hoover told us,"A chicken in every pot, a car in every garage." Yep them were the good old days when we had bread lines and people jumping out of buildings and banks going bust and everybody losing their life savings. Can you say depression?

[shanev137]

"The term BDS has been used in the political arena to describe a perceived tendency by some American liberals to blame President George W. Bush for virtually every ill in the world.[9][10]


-----------


So what''s the acronym called for all the people who think he''s responsible for nothing?

[brianbwb-2009]

"Iacocca paid every penny back, months ahead of schedule, by actually producing something Americans would buy.
There''''s no parallel here." Posted by creeper00

Yes there is, if Chrysler had produced "something Americans would buy" all along, instead of shoddy overpriced krap, and then lied to investors, with the upper management rewarding mediocrity with megabuck salaries while simultaneously laying off their customer base, they wouldn''t have gotten into the situation of needing a "bailout" in the first place.

It is the same thing, a large corporation is too greedy and lazy, then asks the taxpayers to pay for the mistakes. If I had my way, they would be bailed out only after the average Joe and Jane, who have seen earning their power steadily diminish over the past thirty years, is first bailed out.

[standlee5]

Let them FALL. No Bailout.

[oscarez]

Bush is doing a good job of emulating Ronald Reagan and his stupid policies.

[standlee5]

Let the chips fall where they may.

[usbrit-2009]

When people steal it''s called theft; when big business does it, it''s called economics.

[standlee5]

All we have to do is go back to the dsys of accountability and credit worthiness.

[standlee5]

Small banks and credit unions are the best way to go. Let these giant mega banks fall. Who needs them.

[standlee5]

Lying, scumbag, theives. Let them bloody fall.

[walt1944-2009]

THE GREAT EMPEROR BUSH II DEPRESSION IS GETTING CLOSER!!!!
THE GREAT EMPEROR BUSH II RECESSION HAS BEEN HERE FOR YEARS!!!!

It has been learned that the Great Emperor Bush II is NOT an expert at economics, nor does he have the much valued lately "experience" on the subject.

When asked by a reporter about the skyrocketing price of oil, the Great Emperor replied he didn''t know such matters that all he was was a "simple president!" (perhaps "simpleton" would have been a better word).

This kind of reply indicates what everyone has suspected all along; that the Great Emperor does NOT have a plan (about anything!), is totally clueless on the subject of economics (or on anything else!), and proves the old saying that Republicans do NOT KNOW HOW TO BALANCE A CHECKBOOK (their wives handle that!)! The added rumor that the Great Emperor Bush never made it past 3rd grade math, makes the situation even more scary!!!

In light of these revelations, the qualifications of the "supposed" neocon Fascist Nazi Republican nominee, John "the Great Pretender" McCain, appear to fit right in, making him a logical(????) choice to occupy the throne in the Oval Office.

DUMB AND DUMBER!!!!! WHAT MORE COULD ANYONE WANT!!!!

SIG HEIL, BUSH!!!
sig heil, McCain????

[byeneocons]

Bushie, you''ve done a heck of a job.

[standlee5]

How about ZERO earmarks.

[standlee5]

DONT RAISE OUR TAXES.

[creeper00]

Meanwhile, our mutual fund IRA''s are tanking.

Thanks, Dubya.

[standlee5]

Bush is wrong we are getting screwed on these trade deals.

[shanev137]

By the way, has anyone noticed that gold is over $1,000 an ounce, and that Hawaii just went over the $4 mark on gasoline?

Oh yea....and also by the way, how is Brittney doing? LOL

[standlee5]

They''re not going to be happy until we have open borders and "free trade" and re-educate ourselves every time they make a new trade deal and send our jobs overseas or bringin cheaper labor.

[netadmin1-2009]

Anyone know when our economic downturn started? Compliments of 9/11 - that is what started the whole mess.

[standlee5]

We don''t want BUsh''s anti american free trade *** that''ll have us all running around chasing our tails in some kind of transient no border economy. You can become an engineer and when they decide to bring in thousands of enhineers from another coutnry well than you can go back to community college and get updated into a new career. Now doens''t that sound good.

[standlee5]

How can he think we can have confidence in trade when we''ve seen good jobs disappear and labor diluted with illegal immigrants.

[truthspeake2]

The United States has entered a recession that could be "substantially more severe" than recent ones, former National Bureau of Economic Research President Martin Feldstein said
Friday.

"The situation is very bad, the situation is getting worse, and the risks are that it could get very bad," Feldstein said in a speech at the Futures Industry Association meeting in Boca Raton, Florida.




I guess its almost official now...

[pollroller1]

I was told "cheer up, things could get worse." I did and sure enough things got worse. LOL

[standlee5]

So if theky''re getting taxpayer monies for the bailout can we then hold them publicly accountable for their bad decisions.

[venkata4--2008]

"So if theky''''re getting taxpayer monies for the bailout can we then hold them publicly accountable for their bad decisions.

Posted by standlee5 at 12:03 PM : Mar 14, 2008"

Probably not, their CEO may get a 200 million dollar severance package and a golden parachute. Tax payers will bear all the expenses. Just an update, now Swiss franc is equal to a dollar & Australian, New Zealand''s dollars are very close. This is what happens when hands of approach with no checks and bounds on banks lending practices by this administration.