What's the point of being rich if you cannot buy your way out of trouble?  Perhaps the genius of free enterprise has gotten a bit ahead of the curve and out of reach for most of us.

Since when did it become a curse to spend one's fortune on lawyers? Ask any lawyer-Yiddish or not: it's no curse.

"Since when did it become a curse to spend one's fortune on lawyers? Ask any lawyer-Yiddish or not: it's no curse."

I suppose that you would have the inside on that particular sentiment.

...Since when did it become a curse to spend one's fortune on lawyers? Ask any lawyer-Yiddish or not: it's no curse...

Uhhm, sheepishly admitted exception: "...unless the lawyer is spending his or her fortune on a lawyer."

What a great Yiddish quote; simply sublime. It's going in the quote book.

None of the financial houses "deserve" taxpayers charity, but the general public should not suffer because of an all too familiar greed crash that only right wing pervertions of the free market seem able to create. The reality is, we have no choice: these cartels have to be supported.

It's ironic that such bastions of private enterprise, such champions of self sufficency are now demanding public money. True Republicans should howl in outrage at this government intervention, this ineffcient, anti-growth, anti-free market, anti-American, socialist intercession.

Then again, cold hard cash tends to clarify ideology. Socialist, big government is realistic, necessary and appropriate...if you're a billionaire.

It's just a tragedy that it won't work; or at least not for the general population.

Still, there's some consolation in the fact that deficits don't matter and tax cuts for the rich balance the books.

Can America, or the world, endure another pathological Republian administration?

If the CEO of Bear Stearns was just incompetent, why should he be indicted?  Bill Buckner I venture made quite a nice sum of cash during his career and broke far more many hearts, should he have been indicted for that ball going through his legs? Failing miserably should never be a crime. One of Capitalisms fundamental aspects is that people and institutions will fail.

If the guy was criminal in some way, yeah curse away, but as to myself, I would love to fail like he did, so far I have only managed to fail with no money. Failing and getting a half a billion, now that is an accomplishment.

Morgan buys Bear Stearns, Sunday March 16, front of the Times.  I guess Stearns wasn't as solvent as  Schwartz claims it was.

Blackie, do you really think a Wall Street firm would let someone behave as monumentally incompetent as the stories are implying and still let Schwartz run the company?  That implies everyone is stupider and more incompetent than he is - Idiocracy-like.

Maybe this is, as Marty is implying, really just a simple case of greed leading to reckless mismanagement.

I was pleasantly stunned by the tenor of that Morgenson piece, I might have to rethink my notion of the Times as simply a brain-dead corporate mouthpiece.

These bailouts are outrageous (and yes, I know Bear Stearns is done now), my two hopes:

1. The end of Greenspan's reputatiion, he's a stupid human.

2. The end of Reagan's 'moral hazard' bullshit, I'd love to see Wall St. bankers bitching about taxes, regulations, and poor people receiving food stamps and LIHEAP now...

"I would love to fail like he did, so far I have only managed to fail with no money."

He failed and then got bailed out at the price of your grocery/gas bill rising.

Feel better now blackton?

I second what Iggy Pop said.  It's galling that you have to suffer all of the free enterprise, let the unregulated market work its magic, anti-gov't program spending BS from the "right", only see it devolve into the corporate welfare that appears to be regularly necessary to keep the "market" afloat.  You can't have it both ways.  For once I would like to see an entity like Bear Stearns suffer the consequences of f-ing up in a truly free market.  The ripples that would emanate from such an event would be broad and painful, but sanitizing.

blackie...whether or not the CEO of BS gets indicted is neither here nor there as it affects me. But what does piss me off is the fact that these same financial wunderkinds who protest and stomp their feet in feeble protest when "hobbled and hogtied" with federal financial regulations to give some modicum of regulatory and legal behavior, are always the first in line to ask Uncle Sam for a bail-out when the shit hits the proverbial fan. Time and again I hear hyper-capitalists and Republican(t)s claim that IF only the government would stop giving handouts and breaks to the underclasses (because that's pinko-commie bastard thinking) and get rid of all financial constraints to free-market capitalism then all would be right with the world. And yet time and again, the government has to bail these folks out. I think the last time we had this kind of crap was when we had the Savings and Loan scandals of the 80s. Hey...how ironic that financial meltdown and taxpayer bailout involved a Bush boy. Where is that crook Neil anyway?

Yet another illustration of the short attention span of Americans. If we're not flogging the dead horse of Rev. Wright or gnashing our teeth at the pop-cult meltdowns of Paris or Britney, we fulfill our days with Jerry Springer and evenings with entertainews on Fox.

singlespeed,

Are you saying that the wealthy uber-freemarketeers are hypocrites who exploit government to line their own pockets, depend on it to line their own pockets, and excoriate everyone else who turns to government for assistance, opportunity, protection against the predations of  ---- the uber-freemarketeers?

How can that be?

Full disclosure - I work at Bear Stearns.  But exactly what kind of 'bail out' are we talking about?  Selling the company to JP or $2 a share is a bail out?  Since when?  All they did was make sure that the wind-up was orderly so the financial system didn't go down like a row of dominos.

Can we stop talking about taxpayer charity and bailouts?  That's just bull.

I hope Marty's correct in his use of the word "penultimate." I fear he is not.

Assuming that the beast living upstairs is two-legged I keep waiting for the other shoe to drop, when in fact my neighbor in the penthouse is a millipede shod in umpteen pairs of Italy's finest alligator slip-ons.

So, the clunk, clunk, clunk continues through the night as the creeping moneychanger, now in repose, frees his tootsies one by one, pausing to wiggle them in the dark chill.

Thanks, jblumenfeld, for reinjecting some reality into this discussion. Two points:

1) Moral hazard is a fact of life in any complex democratic capitalist society. French bankers get bailed out, so do American ones, and so do investors in, say, emerging market securities when those countries' less than transparent, less than honest officials get caught out in their scams.

2) Bear could never have dominated the CMO market if there were not a culture, and a tax policy, and a set of economic expectations shared and applauded around the world, that many millions of people should be allowed access to artificially cheap consumer credit. Bear exploited this, but Bear didn't create it.

The essence of the problem, the issue that will bedevil us long after the big boys are sorted out, is that Americans live beyond their means. Neither party will tell the good shopper/sonsumer/borrowers the truth about our position in the world, ie that our working and middle classes by and large are badly educated, have useless or marginally useful skills, and cannot justify their expectations of the cushy lifestyle that they've been led to believe is their birthright as American Consumers.  

Both parties are complicit in the creation of the bread-and-circus economy fueled by artificially cheap credit that allows ordinary joes to buy stuff they don't need and can't afford. With few exceptions the left is just as guilty of the right of applauding the cheap money culture (nb William Grieder's critique from the left of the Fed's tight money policies in the Reagan-Bush41 era).

The ONLY people who have credibility on this matter, in my book anyway, are those intrepid truth tellers wandering in the wilderness of the national debate, decrying the sh*t-wage, low-price economy that rests almost entirely on the expectation that American consumers will spend wildly on cheap Chinese-made crap, excessively large houses etc. Robert Samuelson is a national gem. No one listens to Robert Samuelson. That's the problem.

I agree jblum that as public policy goes, this was pretty good (or maybe the least bad). On Friday it indeed looked like a real bailout, but on Sunday, it was clear that it's kind of a defacto bankruptcy done really quickly.

What are the rumors wrt to top BSC corporate officers?

"...top BSC corporate officers?"

Be sure of one thing: Jimmy C will make out like a bandit. Rule of thumb for exec comp agreements is always, if the stock does well, the exec will make a fortune, and if the stock tanks, the exec will make a (slightly smaller) fortune.

Clive Crooks on why the Bear Sterns bailout is a bailout:

-- Two days later, J.P. Morgan is getting Bear for nothing, and in addition has been promised as much as $30 billion in Fed loans, secured against Bear’s dodgy assets. If the assets turn out to be worth less than the loans, the Fed–-ie, the taxpayer–-shoulders the risk. (And that, by the way, is why these arrangements are indeed a bail-out, though not one that helps Bear’s original owners.)

clivecrook.theatlantic.com/.../the_bear_stearns_bailout.php

I'm with WilliamYard on the notion that this is the "penultimate" stage of the banking pandemic. We really have no idea where we are in the increasingly disorderly panic faced by the financial markets.

About 4 years ago, I saw Krugman and Kudlow yelling at each other on cnbc for about half an hour.

At the end though, they agreed on one thing.... the Fed should 'get out of the way' by making money even cheaper! (although to be fair, Krugman was calling for a lot more regulation and of course Kudlow was opposed).

I've tried in different forums to ask Krugman this question (tried to get Josh Marshall to do it, tried to on Krugman's blog), so far, no dice.

Well, it's a complex problem because the rest of the world is also dependent on the expectation of an open Fed spigot. The global capitalist economy we've created demands ever-increasing liquidity.

In my dreamier moments I wonder what an American economy would look like if resources-- not just public investments but also private disposable income, and more importantly, TIME and ATTENTION-- were devoted not to consumption of all manner of sh*t but investment into, say, teachers' salaries, long school days + educational and cultural offerings for kids, vocational schooling to make sure every American has a set of skills that can be applied to renewable energy-related trades and product and service offerings....

As opposed to flat-screen TVs and $300 shoes and 2.5 cars per capita

Oh, one more dream: that Americans will start MAKING STUFF again, very high-quality stuff like cutting-edge autos, safe and beautifully designed and durable children's toys, and that we will as a culture and an economy shift our consumption toward LESS, and BETTER, and higher-priced, stuff.

Bring it back onshore. Enough with the race to the bottom that is the sh*t-wage, sh*t-quality, rock-bottom-price consumer economy.

Yes, the falling dollar will cause us to start making stuff again, but it'll take at least a little time to get such things up and running again, and what to do with all those workers who've been busy building the suburban dream?

Employing lots of them to refurbish office buildings for greater energy efficiency seems like a double winner to me.

It's such a tragedy that, when we had access to tons of cheap capital, we squandered it on stupid stuff rather than spend it on productive activities. We're a poorer nation now, we'll have a lower standard of living, what I'm concerned about is the direction and rapidity of this realignment.

Tep...Of course bankers get bailed out all the time. I think what most people find insulting is when we're told this should be the norm that banks, investment firms, hedge funds shilling crap investment bundles, should expect a bailout from the Fed as part of doing business and that there's no recourse yet the average Joe receives no such countenance. One constantly hears the same industry reps saying that deregulation and less financial regulation on their industry is good for business and cough, cough, the consumer. But it rarely results in better service for the average consumer. So when people say that bailing out "poor folks with bad subprime loans is bad for the market" turn around and say that "underwriting a buyout of a firm at $2/share instead of letting them go under" is good for the market doesn't square the circle.

Watching out for the interests of one company versus the interests of several thousands of homeowner who are living marginally already before they bought into a questionable loan isn't simply a question of moral hazard it's the issue of justifying bailing out or insuring an institution that makes bad investments versus you or I that have nothing to do with a bank collapsing and our savings is in jeopardy. I just find it distasteful when free-marketeers disdain any regulation to insure they're doing things above board are first in line to get the tax-payer funded safety net. Because those same folks tend to poo-poo social safety nets for millions of people.

Ironically enough....I read Wealth and Democracy several months ago and thought that so many of the very financial missteps, bubbles, and investment frenzies of the last several centuries and recent decades were quietly replicating themselves now. Should we expect anything less that shouldering the financial risk taking of a select few upon the backs of the many tax-payers?

As you keep saying about the American consumer living beyond their means being the big financial disaster and the credit card default crisis waiting to happen, is it any wonder we've learned that from the very people so many try to emulate? The very people giving out cheap credit to the very people who can't afford credit knowing full well that the financial ruin of that consumer was the least of their worries if they're making profit off of late-fees, etc. But I guess what most folks willfully forget is that the chickens come home to roost in time and sooner or later the cost of a few write-offs becomes a whole-sale disaster.

All I know and my gut feeling is that the financial mess is going to get pretty ugly before it gets better. Where that this mess were the Beanie Baby bubble instead of an echo of the South Sea Co. bubble.

Hey Tep...

I'm with you on dreaming that America  and Americans get their shit together and stop buying ourselves into debt over disposable consumer goods that mean nothing. Investing heavily in sustainable and renewable energy markets, design AND manufacturing these systems to sell to everyone else, investing hard currency back into the American niche manufacturing sectors. Just like Italy and German have succeeded in pursuing high-quality manufactured goods to small markets, there is no reason we can't do so here in America but to larger markets.

Anyway...I think America's future in high-tech, renewable manufacturing and technologies sectors will come but it's going to happen at the bottom and work it's way up. Of course by the time the politicians realize we need to do something it'll be ten years too late.

Singlespeed - where the f--- are Chuck Schumer and Rahm Emanuel on this now? Raising money from their pals, or doing the right thing?

Sorry, incredibly naive question, I know. Forgive me. To your eloquent post I can only add the point that this is NOT a partisan matter. We have a decadent political culture and a phony debate. Only when we change that debate, and start discussing what we as a nation are willing to do -- what we'll give up (ANWR, farm subsidies, cheap gas etc)-- to get back to the old Yankee ethos will we become a great nation again.

"Investing heavily in sustainable and renewable energy markets, design AND manufacturing these systems to sell to everyone else, investing hard currency back into the American niche manufacturing sectors."

AMEN. Spread the word. Shout it. I'm not up on these technologies but from a business perspective it seems obvious that there's probably a trillion $$$ worth of potential demand for clean/renewable technologies and services. This demand is global and may well be greatest in China, India and the other environmental hellholes, oops, I mean Emerging Tigers. To take one case, China's going to need many billions of $$$ of equipment to clean up the mess created by their gazillions of coal-fired generators.

We should dominate these new markets, and create many hundreds of 000s of high-paying jobs here in the development and servicing of these markets.

Would that our idiotic national debate would focus on this stuff instead of on Jeremiah Wright...

Jimmy C will make out like a bandit?  He lost a Billion dollars here.  A billion.  He's not getting anything back out of that.  The senior guys at BSC have a LOT of stock, and it's all worth $2 a share.  This is a disaster for BSC employees, including Jimmy C and Alan Schwartz, et al.

Tep.... I know it's not a partisan issue and yeah Schumer is schlupping for dollars like a guest host for NPR fundraiser week but then when you've had 20 years of pro-financialization administrations in charge with their endless cheerleading for Greenspan and open palms for donations from Wall Street how does one expect these folks to stop suckling from that teat if the average American is feeling the pinch?

I can only wax poetic for my youthful days when all seemed right and 'Made in America' was still seen on a majority of the things you bought. But I suppose the saving comfort is perhaps the cycle of history repeating itself and we find America as a country built upon the fruits of its labor and the not the shopping of cheap goods will come sooner rather than later. I guess the good thing about globalization is that the market cycles are compressing in frequency it won't take a decade to get out of this rut.

jb - Are you sure he didn't dump much of it before the stock fell out of bed?

Now that BSC has been sold at 2 bucks/share, it's true it's not quite the never-ending poker game (you win, you keep the profits, you start losing, you get a line of credit until you start winning again) that it looked like for a moment that it would be.

Although blumenfeld should be fair and note that a lot of the recent (inflationary) interest rate slashing was to keep those wall st. folks at the poker table while they 'unwound,' this is a de facto bailout for the rest of the street.

Tep, first, I think it's kinda weird that you seem more eager to jump on Dems than GOPers in all this. I'm not sure McCain even knows they use different money in foreign countries, let alone comprehending the ins and outs of good and capital flows.

As for american exceptionalism, Obama is trying to replace the old kind with a new (old) kind. Both he and HRC 'get it,' although I think the latter wants to pretend we're the same post WWII hegemonic power (certainly McCain thinks so), while Obama wants to sneak away from that a bit.

You want Obama to 'level' with the American people? Great idea, he does that, and it's 'welcome President McCain.'

Tep, even I, cynic and Wall St. loather, seriously doubt that top BSC corporate officers could trade their own shares much at all over the last couple of weeks. They might still be rich, but they really are a lot less rich than they were a month ago.

Singlespeed - I grew up in Detroit. Those halcyon days were gone long before I came of age. In my last two years of HS, the price of a gallon of gasoline went from ~$0.20 to $0.80, unemployment in Detroit reached 25%, inflation reached 13%, mortgage rates were close to 20%, and local radio stations sponsored events where auto workers could take turns destroying a Toyota with sledgehammers.

We came back from that mess. We came back from all the Declinist gloom of the early 1990s  about the impending Japanese takeover of not just Pebble Beach and Rock Center but USA Inc. (oh wait, did I say Japanese? I meant Chinese!).

We can come back from this one, too, but the first step is to get behind a leader who sees this revival as his or her #1 priority. Sad to say that the only candidate who even comes close to getting this is the private equity guy from Boston (via Detroit). THAT'S what's disturbing.

WTF is our party on this? Oh, yeah, debating the meaning of "middleclassness." Carry on.

Tep...man they even make it hard to invest in those technologies here as well. I found a US company that makes thin-film PV technologies with contracts to DOD and others markets w/ broad applications for integrated PV applications but you can't buy stock as a US citizen. But I think this has to do with them being listed on the FTSE. But why would an American company doing this kind of technology incorporate here but list on the FTSE and not the NYSE or NASDAQ? Maybe because foreign investors see the market and we don't? Not sure but finding solid companies like these and get the Fed to really press for investing in these is the way to go. It's like sustainable design. The largest client for sustainable buildings is the US Navy and it's because they found out it saves them money! So what's to say the rest of the US can't get on board? Pun intended.

Tep - I KNOW that he did not.  I don't hold him blameless, but he did not dump stock.  That info is publicly available.  His last 13D as of 2/14/08 has him owning 5,838,906 shares.

Now, I don't hold him blameless here - far from it.  But he is getting killed on this.

Debating middleclassness indeed! I do remember in the mid-80s when the economy in Denver had tanked on the weak legs of the "fourth" oil boom of America, squeezing oil from shale was the 'next big thing.' and low interest mortgage rates were a reasonable 22%. Although the only memories I have of Detroit are "Roger and Me" and that great cinematic masterpiece to the Asian Tiger take-over by Japan was Gung Ho! sorry for that low-brow reference but it was the 80s. But then I also discover London's Iron Heel and Matewan wasn't just a Sayles movie but I was in HS so what would I know as a pimply-faced geek back then?

Now where is that made in the US of A 16oz hammer of mine so I can smash my nieces' lead-laden Chinese toys?

mmathog - agreed, I like McC and Obama but I can't vote for McCain given his economic cluelessness and I really don't want to vote for Obama if his admin bandwidth is consumed with identity politics sideshows, as it almost certainly will be.

Gore, Biden, Dodd would be fine. sigh

"And none of this will rescue the unfortunate and, alas, misled or ignorant

folk who were advertised into believing that they could have a house

more-or-less for free."

That's the problem. These poor folks, that had no real education whatsoever, are permanently bombed with publicity on how their very selves is only accomplished through having this and that, then they are pushed by aggressive banking agents into loans that they cannot pay (but the banking agents plus house sellers, eager for commissions, told them that housing prices were going up and they could even make money by borrowing money...) and they followed this basic instinct on having a good habitat...

And now they are living in huge tent camps around cities. The other day, I was watching a story on one of this camps (around LA, I think...) and what left me completely surprised is that these people did not question for a moment the fact that they were to blame for the shit they were in and still believed that everything would turn for the better.

My God, what will happen when they find out that they are being deceived by a strange ideological soup that asks for "big government for the rich" and nothing for them?

What has America turned into? A chaste society?

Chaste Manhattan sold out to the sheiks months ago.

Wall St. bonuses:

1999 - 13.4 billion

2000 - 19.5 billion

2001 - 12.8 billion

2002 - 10.1 billion

2003 - 16.2 billion

2004 - 18.6 billion

2005 - 21.5 billion

2006 - 33.9 billion

2007 - 32.0 billion

I would imagine 2008 we'll see a precipitious drop in that number.

That said, BSC (and perhaps Lehman and maybe a couple of others aside), most of these firms will survive intact, and around '09 or '10 the money train will start right back up again with mostly the same players.

It's irritating though that it's 'good monetary policy' to keep most of these guys afloat at the cost of higher oil, bread and milk prices.

Then it is even worst than I thought.

The problem is, looking at the future, I really can't see a way out.

Well, immediately with all this supply side mumbo jumbo, there will be an appearence of relief.

But what will happen when these absurd Wall Streeters burn the huge ammounts of money central banks are putting on their pockets (because they will burn it, no doubt about it) and when low credit will make people max their credit cards (buying chinese), once again, without a real capacity to pay?

My guess is that only state intervention will generate relief from the circumstances of mass unemployment and mass poverty then produced... But how will America finance that with this dollar and with these astronomic "twin deficits"?

Aren't we facing, perhaps soon, a scenario such as the one we lived in South America, lately in Argentina (meaning: total bankrupcy both of the private and the public sectors)?

Only the Sheiks will survive... Go Alhantan! One of the wonders of the world! It used to be a very rich, developped civilization. It's unimaginable how they got to be what they are today...

jblumenfeld - so I see on the web that JC is buying two $28m apts in Manhattan. Surely he's not paying cash? Does his collateral include those JPMC shares he's to receive that have already risen, sharply, since the deal was announced?

Something's not quite right about this deal.

Oh, Tep, he was buying those apartments already.  Look, I'm not trying to defend Jimmy C.  Maybe he is paying cash, I don't know, and I don't want to defend him.

But we got rooked by this deal.  The beneficiaries of the so-called 'bailout' are all at JP Morgan.  1/3 of BSC is owned by employees - not just Cayne.

The Fed wanted an orderly windup of Bear, and did nothing to rescue the equity holders.  Including Cayne.  Since '98, the Fed and other IBs have had no love for the man who refused to help rescue LTCM.  Anyway, he hasn't been running the Company for the past few months - Alan Schwartz took over at the beginning of December.

"The problem is, looking at the future, I really can't see a way out."

Oh, yes you can, Luis.  Just tend your garden.

The Fed bailout of Bear sort of reminds one of how the mob disposes of toxic waste. After the money has been made in the transactions and it takes possession of the garbage it can't just pour it out on Main St. so it mixes it in heating oil and we all suffer from breathing in the fumes- slowly being poisoned but seeing no one to take arms against.

"Oh, yes you can, Luis.  Just tend your garden."

What do you mean?

Is it that you are implying that Europeans will be very happy watching the downfall of America? You're wrong. Dead wrong. I'm not only speaking about cultural factors, but about very plain economic factors. For instance, who is going to buy the VWs that are produced in my country? More than half of the production used to be sold to America (and it's the largest factory in the country: thousands of jobs...)

And who cares about having the strongest currency in the world when one becomes unable to sell anything, unless production of everything is displaced to God knows where? And since the ECB decided that the most strict monetarism should dominate public policy, the only ones benefiting from the strong Euro will be M. Trichet and his friends (keeping inflation low as a kind of sacred value). Everyone else will have to go to Morocco to find a job (building airplanes and cars to China...)

The problem is that everyone is working on dead wrong economic theories and, at the same time, absurd "economic thinkers" became the new priests. The difference is that we venerated the old priests looking for heaven. And why do we venerate these people that are leaving everyone in deep shit?

This is a new kind of oligarchic tyranny, based on grim ideological factors, that we must all get rid of if we are ALL going to survive...

By the way, read Dionne's article today. It's on target. At least someone is writing well in TNR these days.