JP Morgan and the Fed have cannibalised Bear Stearns valuing the 5 largest investment bank's stock at us$2 a share, in a takeover which has shaken the pillars of world financial markets. JP Morgan got Bear Stearns for a king's ransom and at a bargain basement price whilst the Fed and the US rate or taxpayer will long foot the bill to repay, if ever, loans of some us$30 billion. Jaime Dimon JP Morgan's president got for dirt Bear Stearns building worth anywhere from us$2billion to us$4.3billion, its jewels...asset management and trading gems, and will in no time dismiss most of its 15.000 employees. But the world markets reacted badly. Bear's stock closed at us$30 a share on Friday and by Sunday when the takeover was announced it was worth us$2 or a little more than a Euro. This sharp sleight of hand raises more questions than it answer, for if Bear's stock can go for a song well doesn't it follow that say Goldman Sachs share trading well over us$220 is vastly over valued? Goldman may have the wherewithal to hide its own write downs in the subprime market but confidance in investment banks or more generally in banking is shaken. And this will have a ripple effect on the sagging US economy which now everyone recognises as a sick old man, affect trade, shrink liquidity, and rumble towards untold hardship for Americans and not to say the least even for the Asian and Petro dollar rich emirates.
Cannibalising Bear Stearns has set off a chain reaction of the end of which is difficult to see. So despite the peppermint flavoured words of Hank Paulson at the US treasury or Herr Bush at the Economic Club in New York or Ben Bernanke at the Fed, everyone is scrambling to stem a krash. Cannibalising Bear Stearns is a metaphor for disaster like the giant crane that collapse in mid town Manhattan...it was a tragedy waiting to happen, and it did. The pundits seized the air waves saying, alas, recession has to work itself out...it is easy for them to proffer such pablum, for they've enough stashed away to ride the storm, but what about all the little folk burdened with mortgages and the rising cost of food, housing, education, healthcare, so on and on. Well as the saying goes the rich find a port in a storm but the poor suffer, and suffer they are and will.
Herr Bush will go down in history as a president that will replace Herbert Hoover as the worst president in times of economic hardship. Laissez faire capitalism once again claims its victims, and oh where is a Lord Keynes of an FDR brain trust to rescue us from the greedy and incompetent minions of Herr Bush?
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment