Category Archives: banking

Open Questions About the JP Morgan-Bear Stearns Deal

Posted on March 18, 2008 by Felix

Karen Donovan has a good story up about the complex deal to buy Bear Stearns, and all the high-powered legal advice which went into it. For all that legal firepower, however, the agreement seems pretty precarious: "Everything about this deal … Continue reading →

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Krugman Shouts “Fire” in a Crowded Theater

Posted on March 18, 2008 by Felix

Paul Krugman has really picked up his game on the blogging front over the past couple of weeks, and I like the fact that he feels comfortable throwing ideas out there. But this morning, in a post headlined "Shouting “fire” … Continue reading →

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Lehman: Looking Strong on the Repo Front

Posted on March 18, 2008 by Felix

If you thought a price-to-book league table was arcane, wait till you see what Heidi Moore has come up with: an excess-liquidity-and-other-unencumbered-collateral-to-total-repos league table! I’m impressed. As Heidi explains, the proximate cause of Bear’s collapse was the fact that its … Continue reading →

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The Price-to-Book League Table, Revisited

Posted on March 18, 2008 by Felix

In today’s earnings report, Lehman Brothers reported that its book value rose one cent to $39.45 per share. The stock is doing great this morning, up $6 or so to $37.80, which puts Lehman on a price-to-book ratio of 0.96. … Continue reading →

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How Important is JP Morgan’s Option to buy Bear Stock?

Posted on March 18, 2008 by Felix

There’s one detail of the WSJ’s weekend narrative which is worth its own blog entry: the way in which the deal to buy Bear Stearns was structured. The lawyers seem to have tried very hard to make the deal airtight, … Continue reading →

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The Scramble to Save Bear

Posted on March 18, 2008 by Felix

The WSJ has been talking to Bear Stearns directors, JP Morgan executives, Fed officials, and others, and has a wonderful narrative of exactly what happened this weekend, complete with a fantastic lead quote. The overarching impression is of both banks … Continue reading →

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Lehman Will Survive

Posted on March 18, 2008 by Felix

This should be enough to keep Lehman going. The upspin: in the months of December, January, and February, in the face of credit-market chaos, Lehman Brothers still managed to make a substantial profit of half a billion dollars, more or … Continue reading →

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Why is Bear Stearns Trading at $5?

Posted on March 17, 2008 by Felix

Bear Stearns shares are now trading at $5 apiece: clearly there’s a reasonably large constituency of investors who simply don’t believe that it’s going to be bought for $2 per share. This is definitely one of the weirder merger-arb situations … Continue reading →

Posted in banking, stocks | 3 Comments

Bear Stearns: Let the Lawsuits Begin!

Posted on March 17, 2008 by Felix

That was quick. This morning Paul Kedrosky found some Google ads by lawyers wanting to represent Bear Stearns shareholders; by this afternoon, BearStearnsInvestors.com is up and running. There doesn’t seem to be much hard information there about grounds for any … Continue reading →

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Whither Wall Street’s Most Powerful Woman?

Posted on March 17, 2008 by Felix

"Wall Street’s Most Powerful Woman" is the headline in the April issue of Portfolio, which has yet to hit newsstands. The question is whether she’ll still be there by the time most people pick up the magazine, for the woman … Continue reading →

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Lehman: Battered Hard

Posted on March 17, 2008 by Felix

Now that European markets have closed, it seems that the US markets are taking a decided turn for the worse, with Lehman Brothers unsurprisingly leading the way down: it’s dropped more than 40% so far today and no one knows … Continue reading →

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Bear Karma

Posted on March 17, 2008 by Felix

I just received an IM from a friend: I know some employees at Bear who are truly wiped out. They think it is revenge by the Fed for 1998. He’s talking about the rescue of Long Term Capital Management, which … Continue reading →

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Lehman Thinks Bank Bonds are Cheap

Posted on March 17, 2008 by Felix

Fixed-income analyst Ashish Shah of Lehman Brothers has put out a report this morning urging investors to buy bank debt. "The Fed has finally intervened with overwhelming force," he writes; the regulatory authorities now understand that the time for half-measures … Continue reading →

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Market Open: So Far So Good

Posted on March 17, 2008 by Felix

So that’s not nearly as bad as it might have been. As of 10:00, the S&P 500 is down 1.6%, and the Dow is down less than 1%. JP Morgan is up – that’s really good news. The financials are … Continue reading →

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Is Bear Really Worth Only $2 Per Share?

Posted on March 17, 2008 by Felix

Around the world today, people are looking at each other with a semi-glazed expression on their face, and saying something along the lines of "Dude. $2 a share." As Dennis Berman says, this is what they call on the Street … Continue reading →

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Vikram Pandit Ousts Investment Banking Chief

Posted on March 17, 2008 by Felix

Today is a great day to bury news if you’re an investment bank which isn’t directly caught up in the Bear Stearns collapse. After being forced to bail out his own alternative-investments unit, Vikram has now promoted the head of … Continue reading →

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Bad News for Bear Shareholders is Good News for the Markets

Posted on March 17, 2008 by Felix

Two dollars per share is an astonishingly low price to pay for Bear Stearns: when I first saw it I honestly thought it was a misprint. If Bear is essentially worth nothing, that means other banks – Lehman seems to … Continue reading →

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The New Committee to Save the World

Posted on March 16, 2008 by Felix

Ben Bernanke hasn’t caught very many lucky breaks of late, but the fact that Bear Stearns hit its liquidity crunch and got downgraded by all three ratings agencies on a Friday is probably one of them. The downgrade wasn’t welcome, … Continue reading →

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How Systemically Important is Bear Stearns?

Posted on March 14, 2008 by Felix

Nouriel Roubini thinks the world could absorb the failure of Bear Stearns: It is true that Bear is a large broker dealer; but its systemic importance is much smaller than that of much larger institutions. The world and financial market … Continue reading →

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Did the Fed’s Bear Bailout Prevent a Stock-Market Panic?

Posted on March 14, 2008 by Felix

Willem Buiter explains today why he thinks the Bear bailout was unwarranted. I apologise for quoting at some length, but believe me, it’s a lot shorter than the 2,150-word blog entry: While the Fed, like any public institution, should support … Continue reading →

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Whither Bear’s Chinese Billion?

Posted on March 14, 2008 by Felix

Heidi Moore has the understatement of the day: CITIC has not yet closed its proposed investment in Bear, and today’s moves suggest that will be more difficult. Er, yes. Not least because at today’s closing price Citic’s proposed $1 billion … Continue reading →

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The Death of the Moral Hazard Play

Posted on March 14, 2008 by Felix

Brad DeLong has a good point today: whatever happened to the moral hazard play? It’s an easy enough game: if you think a bank is going to get bailed out, you go long, safe in the knowledge that Ben Bernanke … Continue reading →

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The Bear Facts

Posted on March 14, 2008 by Felix

Are here.

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Liveblogging the Bear Stearns Conference Call

Posted on March 14, 2008 by Felix

12:56: It’s over. They put on a brave face, and clearly tried to indicate that they’re profitable, they have high-quality collateral, and they’re looking out for shareholders. It didn’t seem to help the share price, though. 12:55: "This is a … Continue reading →

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Bear Stearns Could Go Bust

Posted on March 14, 2008 by Felix

So, those liquidity rumors? Turns out they were true – or, at the very least, self-fulfilling. The official statement from Bear Stearns CEO Alan Schwartz: Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity. … Continue reading →

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