Posted on 09/13/2009 12:34:28 PM PDT by Clive
Could any banker be more colourful than Jimmy Cayne, the cigar-chomping, 70-something chairman of Bear Stearns, who was busy playing championship-level bridge right up until a few days before his firm ...
Forget quantitative easing, troubled asset relief, currency swaps and the endless string of mystifying monetary policy manoeuvring of the past year. If the financial crisis was about anything it was about high drama.
As we move into the one-year anniversary of Lehman Brothers' collapse with the tantalizing whiff of economic recovery in the air and a rip-roaring global market rally under our belts, the insanity that gripped the financial world is becoming a memory.
But what a soap opera it was.
There were villainous bankers, unscrupulous subprime mortgage brokers, brainiac derivative engineers turned evil geniuses, lustful consumers, steely-eyed central bankers, hapless investors and delusional homeowners all swept up into the vortex of it all.
Could any banker be more colourful than Jimmy Cayne, the cigar-chomping, 70-something chairman of Bear Stearns, who was busy playing championship-level bridge right up until a few days before his firm was pushed into the arms of JPMorgan for a paltry US$2 a share and his personal fortune went up in smoke?
In his book House of Cards, A Tale of Hubris and Wretched Excess on Wall Street, William Cohan describes how Cayne became spitting angry that U.S. Treasury Secretary Timothy Geithner refused to open the so-called "discount window" to Bear Stearns. This would have allowed Bear to borrow directly from the Fed as commercial banks are allowed to do but Geithner did not think Bear a good enough credit.
"The audacity of that prick in front of the American people announcing he was deciding whether or not a firm of this stature... was good enough to get a loan," Cayne says in the book. "Like he was the determining factor, and it's like a flea on his back, floating down underneath the Golden Gate Bridge...This guy thinks he's got a big dick. He's got nothing, except maybe a boyfriend. I'm not a good enemy. I'm a very bad enemy'"
Cayne sounds like he just stepped out of a gangster movie. And in a plot twist worthy of a Shakespearean tragedy, the Fed opened its discount window the very night the Bear Stearns/JPMorgan deal was announced.
Not only were the cast of characters colourful but the plot of the Great Panic played out at breakneck speed.
There were emergency global central bank teleconferences, G20 crisis talks and sleepless weekends as legions of bankers, treasury officials and lawyers scrambled to put together rescue plans, shotgun weddings and emergency liquidity injections.
Cohan describes the end of the marathon weekend meeting that consummated the Bear Stearns/JPMorgan deal, on which some 200 JPMorgan employees did due diligence in a giant conference room.
Out came a bottle of Glenlivet scotch and a couple of bottles of wine at the Bear building, said Paul Friedman, a Bear senior managing director.
"‘We're now holding our wake,' Friedman said. ‘We're crying and drinking and working on getting pretty drunk.' They were also mooning the JPMorgan traders who were just opposite them on the north side of 47th Street."
It was not Bear Stearns but the Lehman Brothers failure that made everyone's gut wrench however. David Wessel, author of In Fed We Trust, Ben Bernanke's War On The Great Panic, quotes Alan Blinder, a Princeton economist and former Fed vice chairman:
"People in the market often say they can make money under any set of rules, as long as they know what they are. Coming just six months after Bear's rescue, the Lehman decision tossed the rule book out the window. If Bear was too big too fail, how could Lehman, at twice its size, not be? If Bear was too entangled to fail, why was Lehman not? After Lehman went over a cliff, no financial institution seemed safe. So lending froze, and the economy sank like a stone. It was a colossal error and many people said so at the time."
Wessel describes just how entangled Bear was: "Bear Stearns had open trades with 5,000 other firms and was party to 750,000 derivative contracts."
Sunday night announcements became a fixture as officials rushed out crisis measures before Asian markets opened and sleep-deprived financial reporters dutifully reported it all. And still markets plunged.
It was little wonder they convulsed. History was being written.
The Fed's discount window had not been opened to securities firms since the Great Depression. Interest rates were cut to the lowest on record in the United States and Canada. Global currency swap lines were not only opened in emerging markets like Brazil, but in Canada, Britain and Europe as well to meet the insatiable thirst for safe assets. Mr. Wessel called that move an early manifestation of the global nature of the Great Panic.
And who can forget the spectacle of the U.S. government taking stakes in banks and car companies?
"There was no doubt that on Columbus Day 2008, a Treasury secretary and a Fed chairman appointed by a Republican, self-described conservative President had been forced to cross a line that would have seemed impenetrable a year earlier," Wessel writes. "The government of the United States, champion of free markets and victor of the cold war, was buying stakes in the banks."
But all the intervention eventually gained traction. In his book, Wessel writes that Gao Xiqing, president of China Investment Corp, may have hit on the reason why: "Finally, after months and months of struggling with your own ideology, with your own pride, your self-riteousness...finally [the U.S. applied] one of the greatest gifts of Americans, which is that you're pragmatic."
Yet as the markets settle down and officials begin to contemplate how to unwind their emergency measures, it not clear whether the drama is over or Act Two only beginning.
-- Jacqueline Thorpe is economics and markets editor at the Financial Post
Act 2 is ensured with more trillions for the financial sector at public expense, and then...? There is already plenty written about “and then...?”
Isn’t Obomba “speaking” on this Monday Night??? LOL. LIAR.
It is too bad we don’t have some invesigative group that is non-political to investigate the people who started this crisis last year as a means of pushing Obama into the White House.
Just like Obama’s lack of legal standing to occupy the presidency, almost everyone knows that a powerful group of pro-Obama people manipulated the financial system to precipitate a crisis just before the election but no one with the authority or capability to identify the criminals has the fortitude to investigate the treachery and manipulation.
Yes it was a planned out act. Bush did his part and disappeared leaving us to fend for ourselves.
What planet is this guy on? There is no "economic recovery" going on when another 500,000 people lost their jobs, and a few points of speculation (which has all but evaporated over the last two weeks) on a select few stocks does not translate into economic recovery, and companies re hiring laid-off workers.
We are in a steady, downhill slide which shows no signs of stopping, and now our dollar has begun sliding as well, due to the massive spending of government, which only translates into inflation, less buying power of an already tight consumer money supply.
| Jacqueline Thorpe had better not expect diamonds and a Mercedes in her stocking this Christmas, More likely a lump of coal and some nuts.
Engineering this financial collapse began back in the Carter Admin era, was strengthened and expanded during the Clinton Admin, and became ripe and ready for Obama, so the push began. Massive election fraud, MSM bought and in the pockets of the Marxists traitors like Soros, Obama all spit shined and ready to go- this was their do or die moment to seize power and change this nation from a constitutional capitalist republic into a Marxist government dictatorship.
Clearly Bush was on the Obama payroll. Be careful at crosswalks, kids, I’m not sure you’re up to handling them.
Not Obama the Bilderburgs..Remember the meeting when they told Hillery to buzz out?
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