503-785-3485
bill@conerlyconsulting.com
  • Facebook
  • Twitter
  • Linkedin
Conerly Consulting Conerly Consulting
  • Consulting
    • Approach/Philosophy
    • Sounding Board
    • Economics and Business Strategy
    • Assessment
    • Case Studies
    • Testimonials
  • Speaking
    • The Package
    • Topics
    • Testimonials
  • Writing
    • Businomics Newsletter
    • Businomics
    • The Flexible Stance
    • Blog
  • Industries
    • Banking/Finance
    • Manufacturing
    • Other Industries
  • Video
    • Speaking
    • Event Promotion
    • Business Planning
  • About
    • News Coverage
  • Contact
  • Consulting
    • Approach/Philosophy
    • Sounding Board
    • Economics and Business Strategy
    • Assessment
    • Case Studies
    • Testimonials
  • Speaking
    • The Package
    • Topics
    • Testimonials
  • Writing
    • Businomics Newsletter
    • Businomics
    • The Flexible Stance
    • Blog
  • Industries
    • Banking/Finance
    • Manufacturing
    • Other Industries
  • Video
    • Speaking
    • Event Promotion
    • Business Planning
  • About
    • News Coverage
  • Contact
  • Home
  • Economy
  • Bear Stearns Bailout: It’s Not Who You Think

Economy

19 Mar 2008

Bear Stearns Bailout: It’s Not Who You Think

  • By Bill Conerly
  • In Economy, Investments, Public Policy
  • 1 comment

The quick read from the press is that the purchase of Bear Stearns by JPMorgan Chase was a "bailout."

Jim Hamilton over at EconBrowser doesn’t buy that story.  He says, "$2 a share is no bailout, but instead represents a fire sale price."

I buy that, because Bear had been selling for $57 a share two trading days before the buyout.

But there’s more to the story from the New York Times (hat tip to Barry Ritholtz):

Holders of the more than $300 billion in Bear Stearns bonds, in the
meantime, are purchasing Bear stock to strengthen their hand in voting
for the deal, thus guaranteeing that their bond investments will retain
the backing of JPMorgan and its guarantor, the Federal Reserve Bank of New York.

That’s who is getting bailed out: Bear’s creditors, clients, and counter-parties.  The people whose due diligence was not very diligent.  The people who could help us avoid another debacle by being very, very careful in their credit analysis.

But no, care need not be taken.  If you are doing business with a large investment bank, don’t worry. The Fed will bail you out if you are stupid enough to lend credit to an insolvent institution, or if you ask an insolvent institution to hold your securities, or if you pick an insolvent institution to be your counterparty in a derivatives contract.

Dr. Ben rode to the fire in a big red truck.  But his truck was leaking gasoline all over town, setting up the street for another major conflagration that could be far worse than the Bear Stearns fire.

Someone should have pulled Bernanke aside and told him to chill.  The economy is pretty resilient.  It can withstand a lot of turmoil.   Instead, the chairman is too afraid of financial turmoil, and as a result, he’s going to get more of it.

  • Share:
Bill Conerly

    Comments

  1. Laurence Hunt
    March 21, 2008

    I’ve added my thoughts here:
    http://laurencehunt.blogspot.com/2008/03/bill-conerly-critiques-bear-stearns.html
    Great analysis, and you have correctly perceived that Fed Policy is problematic. In my view, Fed Policy is probably now the primary problem.

Comments are closed.

Search

Sign Up For Our Newsletter!

View Latest Issue

RSS Bill’s Forbes Articles

  • The Labor Market Is Tight Despite High Unemployment February 19, 2021
    Finding workers is hard despite the high unemployment rate, because many jobless folks don't match the skills needed, don't want to shift occupations or prefer to collect unemployment. Business focus on retention should be top priority.

Testimonials

As you know, it can be difficult to find economists who provide good substantive information who are so entertaining and engaging. I received many enthusiastic comments from members and others in attendance. I was very pleased with Dr. Conerly and have recommended him to NCSTAE, our national organization.
Molly Steckel, Idaho Telecom Alliance
AgFirst Farm Credit Bank has benefitted from Bill Conerly’s unique insights and perspectives several times over the past five years…his materials consistently cover the points that we agree on…he has been very well-received by our groups, and we look forward to having Bill with us again in the future.
Ronnie Hucks, AgFirst Farm Credit, Columbia
Your presentation was right on the mark. I received more positive comments about you than any other presenter. We would not hesitate to recommend you to others or have you back for an encore performance.
Bob Russell, Oregon Trucking Association
Our audience of local business and community leaders not only valued the economic data you provided, but they really appreciated that you made it applicable to their businesses, their personal lives and moreover – that you presented it in a clear and entertaining manner.
Scott Boyer, Mountain Pacific Bank
Bill Conerly is one of the most interesting and engaging speakers I have ever heard. The fact that he is a very funny man is a bonus.
James A. Kronenberg, Oregon Medical Association
Bill is a delight and easy to work with. The client thought he was great and delivered value to their group. I would definitely recommend Bill.
Andrea Gold, Gold Stars Speakers Bureau
Bill assisted O.B. Williams Company with developing a strong business plan that we implemented 18 months ago. As a result and together with Bill, we are improving our position within our highly competitive market segment.
David Wick, CEO, O.B. Williams Company (wood products)
The ratings you received from our banker evaluations were among the highest I’ve seen, which matched my impressions exactly. Your presentation style is quite engaging, you bring interesting and valuable content, and our ability to interact in a stimulating way during “Q&A” sessions makes you a valuable addition to any meeting agenda. As a bonus, you are a genuinely enjoyable participant in conference activities beyond your presentation.
Steve Yeakel, Montana Independent Bankers
Bill did a great job! There were many in the audience who liked him and many in the audience who loved him! Bill shared pertinent and timely information with our audience of commercial real estate professionals and added interesting stories and a funny sense of humor twist.
Jana Knoll, BOMA Boise
Thank you for a wonderful presentation. Everyone who heard your presentation was impressed with your analysis, and strong command of facts and theory. More importantly, your ability to weave together substance with humor, in a very dynamic way, meant our attendees learned and retained more information than we would have typically expected. You made economics fun and you left our members with powerful insights on trends and issues to consider as they prepare for the future.
John Aguirre, Oregon Association of Nurseries

Get in touch

(503) 785-3485

bill@conerlyconsulting.com

PO Box 2188
Lake Oswego, OR 97035

Useful Links

  • Consulting
  • Speaking
  • Videos
  • Blog
  • Press
  • Contact

Social Links

  • Facebook
  • Twitter
  • Linkedin

Newsletters

Copyright 2020 Conerly Consulting LLC