Bear Stearns Collapses

[snoopy369]

Fed turning a profit

(well, fed in the black anyway, no idea if they are profitable or not, but I'd hope they are...)

[Aeson]

I have a $30 billion rock I'd like to sell the Fed. I found it on the beach today, and it's kinda pretty. (And maybe a bit radioactive, who can say? All I know is it makes me feel kinda ill when I hold it, like the world is crashing down around me...) I can't find anyone willing to buy the rock from me for $30 billion, but it's obviously worth that much. Right?

[Zkribbler]

Too late, Aeson. I've already formed Zkribbler's Eleven, a team of crack burglars who will be breaking into the Fed using the legendary Rodenator.

[Geronimo]

The revised deal, which was negotiated over the weekend, is aimed at mollifying Bear's investors who have been furious with the $2-per-share agreement struck last weekend as the storied investment bank was on the brink of collapse.

If Bear were allowed to collapse how much would Bear's investors get per share? wouldn't it be zero? How can they possibly be angry about $2 per share? Couldn't the fed have made the deal even less attractive than that?

[Aeson]

Plz Z, if you happen to find my rock in there during the course of your heist, will you tell it "hi" for me and that I hope they're happy in their new home?

[Zkribbler]

Originally posted by Geronimo


If Bear were allowed to collapse how much would Bear's investors get per share? wouldn't it be zero? How can they possibly be angry about $2 per share? Couldn't the fed have made the deal even less attractive than that?

There'd be a bankruptcy sale. Any remaining equity would be distributed to the shareholders. I'm guessing that they're angry because they think they'd get more than $2/share.

And being that Morgan -- in the face of squawking -- quintupled its offer, Morgan agrees.

Aeson - Okie dokie.

[Aeson]

Originally posted by Geronimo
If Bear were allowed to collapse how much would Bear's investors get per share? wouldn't it be zero? How can they possibly be angry about $2 per share? Couldn't the fed have made the deal even less attractive than that?

Shareholders have leverage because obviously the Fed was worried about what would happen to others if BSC went BK. BSC shareholders had already lost almost everything, so had less to lose than whoever else was at risk.

[Aeson]

Looks like Lehman is finally closing in on it's promise of being the next Bear.

(I don't think this is it right here, right now, so I took profits. I doubled my economic stimulus check today though. Thanks greedy bankers with a failed business model and idiot government who thinks throwing money at the problem will make it go away )

[Asher]

Originally posted by Aeson
Looks like Lehman is finally closing in on it's promise of being the next Bear.

Don't count on it. They're extremely confident right now.

They're even handing out multi-million dollar software contracts this week and hiring lots of new people.

[Aeson]

We'll see. The reason they're still in business is because when BSC was bought out the Fed was slashing rates, opened up a window for directly accepting collateral from LEH (among others... who incidentally used the window "just to show we can, not because we need the capital"), and warned other IBs away from trying to get LEH's clients.

The Fed could accept more of LEH's junk of course and continue to support them. Not much more in the way of rate cuts they can do though. And if LEH's clients start jumping ship, none of it will even matter.

Of course I'm rooting for their stock to come right back, so I can buy cheaper PUTs on them again. As far as I can tell they're a failed business right now being supported by taxpayer dollars.

[Asher]

Such a drama queen.

[Aeson]

Too bad you don't directly invest in the stock market, you could go long LEH... "generational buying opportunity" at prices this low!

[snoopy369]

Insider information

[Asher]

Lehman is massively restructuring themselves internally as part of a very high-level initiative. It's about half way done with more to come. Lehman is in a better position now than before.

It's not going anywhere, at least any time soon.

[Aeson]

Well, whatever is going on, the stock market sure doesn't like it. Rumors that LEH used the window again, denial by LEH, rumors that LEH is considering raising capital by issuing more common (haven't seen a denial), even some rumors that there's a run on LEH.

Look at the volume... something is up. The last time the volume was like that was the day BSC went down. Might be another bank, or even just rumors (though there've been rumors for weeks without the volume)...