June 23, 2008 – 4:00 pm

Word on the Street is that JP Morgan is on the prowl again this time with its its sights is set on Wachovia. An analysis of how this fits either company is not forthcoming here. The only question begging an answer is whether JP Morgan is in trouble again or has become the FED’s elimination machine of choice? This will get very little play in the mainstream media unless the scam collapses; then everybody will show up late to the party, but with lots of favors. To begin with, it has been established

that 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

If this is a straight forward buyout as they would have you believe, one might like to ask where is Morgan going to the cash from. Supposedly they still have to wrestle with a bit of indigestion from dining on Bear’s carcass. That dinner surely included the carrion of some CDO’s that certainly couldn’t have gone down all that smoothly with all those dirty derivatives already clogging Morgan’s arteries. Hear ye:

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?”

Well, you don’t tell them that, especially when your CEO sits on the New York FED board. You tell them they are going to buy another bank with problems of its own, and the FED electronically funds an off shore account from which Morgan can magically come up with money for the buyout. That spells ripoff of Wachovia and bailout for JP Morgan. Can you spell inflation for the rest of us?

Of course on the Street, where “competition is sin,” there is always the option to simply chew what you can when you can. Right now Wachovia is cheap and your money’s for free.


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