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• A very high cost for big mistakes

  Posted Mar 16 2008, 07:37 PM by Charley Blaine
  Filed under: Investing, M & A, Bear Stearns, Banking, subprime, Federal Reserve, Interest rates, stocks
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  The proposed sale of Bear Stearns on Sunday to JPMorgan Chase for $2 a share, or $236 million, will keep litigation lawyers busy for years as enraged shareholders seek to recover anything from the disaster.

  The losses from Bear Stearns' demise are shocking, so shocking that Asian and Australian stocks tumbled on the news. The dollar was fallling. Crude oil jumped over $111 a barrel, and European shares were expected to open lower as was the U.S. stock market.

  From a peak price of $171.52 in January 2007, Bear Stearns managed to lose 98.8% of its peak market value of $20.2 billion in less than 15 months, all because the company bet everything that the housing market and the markets for securities backed by subprime mortgages wouldn't break. It did   Read More...

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• A bailout for bond insurers. How about big banks?

  Posted Jan 29 2008, 02:08 PM by Douglas McIntyre
  Filed under: Banking, Citigroup, Federal Reserve
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  The head of insurance regulation in New York is busy as a bee trying to bail out Ambac and MBIA. According to the FT, "Eric Dinallo, the New York state insurance superintendent, is being privately supported by the New York Federal Reserve Bank and other regulators." If the muni bond insurance companies go under it could lead to a new round of fixed income instruments write-offs which would hurt Wall Street balance sheets.

  If the government is going to drag the muni bond insurance companies out of their mess, why not a little help for the likes of Citigroup, Washington Mutual, and Wells Fargo?

  Mr. Dinallo is attempting to get the big U.S. banks to provide the bond insurers with $15 billion in credit to shore up their balance sheets. It is an interesting proposal but it does beg the question of where the cash-strapped banks will get the money. It could be the beginning of a 21st Century version of borrowing from Peter to pay Paul.    Read More...

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