Bear Stearns blows the last bits of confidence in banking sector

Hobbes, one more day, one more bank in trouble. But this time seems it is for good. Bear Stearns is going under. Talk about timing, on late last week the bank stock collapse in fears of it going into bankruptcy protection (the US save-the-day solution for business in trouble, chapter 11). Bear is the smallest of Wall Street’s big five investment banks.

Morgan Stanley, Goldman Sachs, Merril Lynch, and Lehman Brothers couldn’t help but see how Bear was being saved first by a money injection from the Federal Reserve and JP Morgan first and late Sunday evening the investment bank agreed to be purchased by JP Morgan for a ridiculously low $250m. The price values the company at $2 a share, just a 93.3% less that their closing price on Friday, $30.

According to the Telegraph of London last Thursday a spokesman for the investment bank said: ‘There is no truth to the liquidity rumours’.

See, here is where the problem with the market lays: lack of trust. Who can trust the liars at the helm? I don’ blame you. Lack of accountability seems to be the status quo. Where is the banking industry going? One day they lie to you and the next they get backing from the Central bank of the day. Bear Stearns broke the speed of light, twice.

On Thursday, March 13 they insisted that:

[Bear Stearns] has $8bn of ready credit lines and enough funds to meet its debt obligations for the next year without having to sell assets or take out fresh debt.

But the weekend came and headlines read a different story by late Sunday: JP Morgan Chase close to Bear Stearns deal.

Hold on, is this the same Bear Stearns? Yep, it is, and guess what, probably JP will only sack a few thousand employees and business will be as usual in no time. Just a face lift, change the logo on the entrance, spanking new business cards for all, get rid of the young finance privates, a bit of sugar, shake it and… we’ll call the offspring ‘synergies‘. The markets will smile again, and a happy ending for the day.

Why do we keep  biting the bait and being fooled by big corporations and lap governments? Well, probably because it just suits us. It doesn’t go with us, or does it?

.Calvin

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