The rumor is that JPM will acquire parts of Bear’s business Monday morning. They especially like the building. Nobody wants to see markets to open before the deal is done.
“You can safely assume that Bear is not alone here,” said an interest rate strategist at one European investment bank in London, who declined to be identified. “We have been setting prices in swaps markets in recent days that were designed to say ‘no deal’ and at least one other U.S. investment bank — not Bear — dealt. That is very worrying if they needed the cash that badly. We have been forced to review our counterparty limits ever since.”
Well, that must be Lehman, they’re the one who tumbled 14% Friday.
There is one explanation of why this happened:
This week’s emergency credit market intervention by the US Federal Reserve was supposed to ease the liquidity crisis for struggling financial groups such as Carlyle Capital Corporation.
But David Rubenstein, co-founder of the Carlyle Group, said it only accelerated the demise of his group’s mortgage-backed securities fund, which is being liquidated by its banks for defaulting on more than $16bn of debts only eight months after listing on Euronext Amsterdam.
In response to the credit woes ripping through the financial system, the Fed this week unveiled a new $200bn Securities Lending Facility that will allow dealers to swap hard-to-finance mortgage securities, such as the $21.7bn held by CCC, for Treasuries.
“The Fed intervention was designed to help, but it had the reverse effect of what you would expect,” Mr Rubenstein said in an interview with the Financial Times just hours after walking away from frantic, last-minute talks with banks this week.
“People in the banks said, ‘Because of this Fed move the collateral is now worth more, so let’s seize it and sell some of it immediately’,” he said.
That someone with the stature of Mr Rubenstein at a group as influential as Carlyle – once termed the ex-presidents’ club for employing political heavyweights such as James Baker and John Major – could not persuade banks that CCC was worth saving shows just how dire the credit crisis has become
06/22/07 – 02:53 PM EDT (closing price is $143.75)
Buy Bear Stearns (BSC – Cramer’s Take – Stockpickr) despite all the toxic hedge fund handwringing, Jim Cramer said Friday on CNBC’s “Stop Trading!” segment.Cramer said 1998’s collapse of the Long Term Capital Management hedge fund “was 100 times worse” than the apparent demise of two highly leveraged Bear Stearns funds that were betting on subprime mortgages. Cramer said the near implosion of the funds “is a liquidity issue, not a credit issue,” and that big Wall Street buyers of the fund’s paper, such as Barclays (BCS – Cramer’s Take – Stockpickr), “need to grow up.”
Cramer said there will be another toxic fund out there somewhere that will blow up, but that’s just “another group of idiots” and investors should keep “a cooler head” before they go out and sell all their brokerage stocks on the news.
Tuesday, 11 Mar 2008 (closing price is $62.97)
Dear Jim: Should I be worried about Bear Stearns
in terms of liquidity and get my money out of there? –Peter
Cramer says: No! No! No! Bear Stearns is not in trouble. If anything, theyre more likely to be taken over. Dont move your money from Bear.