Bear Stearns was gutted from within. The take down from the board room could not have been more bloody if done with a straight razor in an ally, but by the callous smoothness of it, the share holders never knew they were cut, just that they were bleeding.
As the shares hovered at $74, the trigger was pulled, and the brutal fall wouldn’t end until $2.84. On March, 14 it opened at $54.24; it closed at $4.78 the following day with most of the crushing 50 point decline on a single stick and gap. Share holders, some of them life long employees with shares loaded into retirement funds, were wiped out. With all eyes on the Street for bears, no one suspected the sharks in Stearns own board room, or at the Treasury, the FED or even the SEC. But John Olagues showed that it was really JP Morgan on the brink of bankruptcy, not Bear Stearns. He was not alone:
In an April 23 article in LeMetropoleCafe.com, Rob Kirby agreed with Olagues that it was not Bear Stearns but JPMorgan that was bankrupt and needed to be “recapitalized” with massive loans from the Federal Reserve. Kirby pointed to the huge losses from derivatives (bets on the future price of assets) carried on JPMorgan’s books:
“. . . J.P. Morgan’s derivatives book is 2-3 times bigger than Citibank’s – and it was derivatives that caused losses of more than 30 billion at Citibank . . . . So, it only made common sense that J.P. Morgan had to be a little more than ‘knee deep’ in the same stuff that Citibank was – but how do you tell the market that a bank – any bank – needs to be recapitalized to the tune of 50 – 80 billion?”
So, the take down of Bear Stearns was really the bail out of JP Morgan by the FED and its CEO Jamie Dimon, who sits on the board of directors for the New York Federal Reserve Bank. Bear Stearns CEO Schwartz was not on the NY FED Board. In fact no one from Bear Stearns is on the Board, so it is probably just coincidence that three days before the murder of Bear Stearns there was a weekend meeting which included no one from Bear.
Federal Reserve Chairman Ben S. Bernanke lunched on March 11 with a Who’s Who of Wall Street leaders, including JPMorgan Chase & Co.’s Jamie Dimon, three days before the central bank rescued Bear Stearns Cos. from bankruptcy.
Other guests included Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein, Lehman Brothers Holdings Inc. CEO Richard Fuld, Morgan Stanley President James Gorman, Citigroup Inc.’s Robert Rubin, Blackstone Group CEO Stephen Schwarzman and Merrill Lynch & Co. CEO John Thain. Alan Schwartz, the CEO of Bear Stearns, was not listed among the attendees.
Bernanke traveled to New York on March 7 for three meetings, including one over lunch. The Fed blacked out the identities of attendees at all three sessions.
That’s right, REDACTED! See how things just seem to fall in place for the CEO who sits on the FEDs board. And let’s not forget about the Governor of New York.
…Remember former New York Governor Eliot Spitzer? The guy who, as Attorney General of New York, had been on a crusade against the deceptive practices of the investment banks like JP Morgan and Bear Stearns? The guy who had made the investment banks pay MILLIONS of dollars in fines and settlements? The guy who was in the process of cracking down on the monoline bond insurers at the very time the Bear Stearns situation erupted?
In mid-February, Spitzer had gone to Washington, D.C., and he had been quoted by the Washington Post. Here is what he said: “Not only did the Bush administration do nothing to protect consumers, it embarked upon an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems [the subprime lending crisis] to which the federal government was turning a blind eye….When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners the Bush administration will not be judged favorably.” During his visit to Washington, Mr. Spitzer had a visit from a prostitute at his hotel room.
On March 7, the same day that Mr. Bernanke was in New York having three meetings with persons whose names were redacted when Mr. Bernanke’s “daybook” was made public, Governor Spitzer learned that he had been ensnared in a prostitution investigation. On March 10, Spitzer gave a public statement apologizing for not having lived up to his standards. On March 12, with his wife by his side, Governor Spitzer resigned. Thus, the public servant most hated by the investment banks left the public stage at the very time when the Bear Stearns drama was reaching its climax. Don’t misunderstand me. Spitzer needed to resign. I have great sympathy for his wife and family, but no sympathy for him. However, the way the scandal made the news was interesting. Curious timing, to say the least. Perhaps it was coincidental.
Despite this plethora of evidence, the Wall Street deception machine concealed the betrayal of Bear Stearns by smothering the media and snuffing Olagues out:
After reading the piece, I contacted Mr. Olagues and asked for permission to repost his article with his bio. Additionally, I was curious, so I asked whether or not anyone from the mainstream financial press had contacted him regarding an interview or giving his article greater exposure?
His reply to me:
You can do with it what you wish. I have not had any calls or emails from the main stream media as they will not criticize the FED or J.P. Morgan. I am saying the J.P. Morgan essentially stole $30 billion from the tax payers through the FED and did a big favor for the short sellers, who probably made a few billion. From Cox to Bernanke, to Dimon and Cramer, they all played their roles.
The deception is so complete that nearly nobody knows the truth of the bank’s collapse. And now the same perfectly efficient machine is being turned toward Lehman Brothers.
To the naked eye it appears that Lehman Brothers is another Bear Stearns and that is exactly what they want you to think. Headlines such as “Is Lehman Brothers the next Bear Stearns?” are scattered across news papers and blogs. The reality is that Lehman Brothers is another JP Morgan. The the CEO of Lehman Brothers Richard Fuld, is another member of the same FED board, just as Dimon. As we have seen, things just seem to work themselves out for those who squat at the FED board:
Whether Lehman can come up with the “liquidity” to meet its debts is no longer an issue, because it expects to be feeding at the trough of the Federal Reserve, just as JPM did when it bought Bear Stearns at bargain-basement prices. The difference between the two “bailouts” is that Lehman Brothers, unlike Bear Stearns, will actually get the money. Why is Fuld so confident of this rescue operation? Olagues notes that Fuld, like Dimon (and unlike Bear CEO Alan Schwartz), sits on the Board of the New York Federal Reserve.
USC Title 18 Chapter 11, section 208 (note 1) makes it a felony punisable up to 5 five years for members of the Board of Directors of a Federal Reserve Bank to make Bank decisions which benefit their own interests. Attached is a Statement of the role of Federal Reserve Bank Directors.(note 2) It’s apparent that such notables as J.P.Morgan’s James Dimon and Lehman’s Richard Fuld, as directors of the New York Federal Reserve Bank, will make decisions which will benefit their companies and themselves. Senator Christopher Dodd, in a radio broadcast of March 27, 2008 and noted in the New York Post,(note 3) stated that James Dimon had a coflict of interest, given his position on the NY FED Board of Directors and that matter needs to be examined. But Dodd failed to mention the conflict of interests at the April 4, 2008 Bear Stearns/J.P. Morgan bail-out Senate hearings. Perhaps it was because Senator Dodd receives political campaign contributions from none other than James Dimon.
The deep-out-of-the-money put volatility is the best indicator that insiders know the stock is headed down in the short term. But another place for smart money to flex its muscle is the bond arena, where all bets for Lehman are on:
Government officials who spoke to DealBreaker on the condition of anonymity said they are worried that the market is convinced the Federal Reserve won’t let a major US securities firm collapse. This is a cause for alarm because it indicates that investors are not taking into account full range of risks faced by investment banks, which could in turn remove an important market check on risky behavior.
“The Federal Reserve won’t let a major US securities firm collapse.” What was Bear Stearns? It was unrepresented on the board of governors of the FED, but just like JP Morgan, Lehman Brothers is.
And it’s deja vu all over again as secret meetings are again underway – this time at Leman’s house. Is the FED bailout going through BlockRock this time?
I scoff at the notion that Blackstone will be some sort of savior for Lehman. Indeed, I wonder if Blackstone has any idea of what it is doing at all. Blackstone is certainly not firing on all cylinders lately. Is it firing on any cylinders? Inquiring minds may wish to consider a Vital Lesson From Blackstone.
Lehman Brothers reports earnings in the morning, but that in itself is no guaranty of clarity, as we saw in the company’s Q1 reporting.