The Fed has just committed $29 billion of taxpayer’s money to back assets as part of an agreement for JPMorgan Chase & Co to buy Bear Stearns investment bank.

Bear's rescue, orchestrated by the U.S. central bank in close consultation with the Treasury Department, brings up some interesting questions.

1. Was this a justified rescue to prevent a systemic collapse of financial markets?

2. Was this a 30 billion taxpayer bailout, as some have called it, for a Wall Street firm while people on Main Street struggle to pay their mortgages?

3. Why was this bail-out not set up as a loan?

I would like to thank all the GOP followers who believe in less government regulation. Thank you for believing in the honesty and goodwill of big business and big money. Thank you for giving even more of our hard earned money to yet another big financial institution. I sleep better knowing that you guys are out there looking after Mr. and Mrs. Joe Average. Praise the lord and pass the ammunition.

1) One will never know for sure but most likely.

2) No.

3) Because it wasn't a bailout for JPM. They don't need to be lent the money to by Bear.

Asking questions and then providing a conclusion. Strange way to post. Are you curious or just pretending?

Echo asked what other people thought, and then presented his/her own opinion. Is there something wrong with that? If so, you might want to tell pretty much everyone else on the forum. :rolleyes:

1) Well, it WAS indeed a rescue to prevent a collapse of the financial markets. Was it justified? No.

2) Yes. Exactly.

3) Because the Corporations here run the Government. They simply handed the money to themselves.

1) Well, it WAS indeed a rescue to prevent a collapse of the financial markets. Was it justified? No.

2) Yes. Exactly.

3) Because the Corporations here run the Government. They simply handed the money to themselves.

Unfortunately you are 100% right FT.

My question is, how much effect does a collapse of financial markets have on everything else? Surely it has a large effect, as it will make it very difficult for people to borrow money, but is that the only benefit the financial markets provide?

What would actually happen should Bear Stearns be allowed to collapse?

This whole financial "system" depends upon keeping the credit flowing, the papers shuffling and hoping that nobody notices that none of it is based upon anything real anymore.

From Wikipedia:

On March 20, 2008, Securities and Exchange Commission Chairman Christopher Cox said the collapse of Bear Stearns was due to a lack of confidence, not a lack of capital. Cox noted that Bear Stearns's problems escalated when rumors spread about its liquidity crisis which in turn eroded investor confidence in the firm. "Notwithstanding that Bear Stearns continued to have high quality collateral to provide as security for borrowings, market counterparties became less willing to enter into collateralized funding arrangements with Bear Stearns," said Cox. Bear Stearns' liquidity pool started at $18.1 billion on March 10 and then plummeted to $2 billion on March 13. Ultimately market rumors about Bear Stearns' difficulties became self-fulfilling, Cox said.

And if the financial markets had collapsed, I'm sure everyone against this move would have all agreed that it was the best way to handle the problem? Yeah right.

As for it being a bailout - who's been bailed out? It's not like the move allowed Bear Stearns to maintain it's position. It was bought for less than a tenth of it's stock price pre-crisis, so the company as a whole hasn't been bailed out. Most of the employees supposedly had a lot of their money in company stock (apparently having learned nothing from Enron), so they've been lost vast amounts of cash, so I don't see that they've been bailed out. The biggest potential beneficiary would be JPMorgan - if they can rescue Bear Stearns assets from the crapper they might make out big given the small price they paid for Bear Stearns. But that remains to be seen.

It's worth noting that it's not like the government handed someone $30 billion. The taxpayers could potentially end up losing that much if all of the Bear Stearns investments we guaranteed go down the toilet, but that's unlikely. And according to NPR, the Fed handpicked Bear Stearns best investments as collateral, which makes the loss much less likely.

1. Was this a justified rescue to prevent a systemic collapse of financial markets?

2. Was this a 30 billion taxpayer bailout, as some have called it, for a Wall Street firm while people on Main Street struggle to pay their mortgages?

3. Why was this bail-out not set up as a loan?


1. Yes.

2. No. Since they had already lent/distributed this money to the people with mortgages who spent it on vacations and jetskis. These first and second mortgages or even refi's were taken out at inflated home values. You can't blame the lenders on this.

3. This is what bothers me. How can a few guys go in a closed room and make decisions to sell out at $2 or then even $ 10 a share of a PUBLIC TRADED company without shareholder approval. I know for a fact, my neighbor, Joe Lewis is getting ready to file a major lawsuit against BS, JP, and the Feds. He had invested $ 1 Billion at $ 90/share.

You are correct the Feds should have given a loan to BS for something like 2% APR and then they could have gone back to their borrowers and restructured their loans at 3% or 3.5% (instead of the 6% to 11% they are paying now) for some time period until they can catch up with their payments.

a perfect example of economic development keeping the top 1% on top.

In respose to the question...Was this a 30 billion taxpayer bailout, as some have called it, for a Wall Street firm while people on Main Street struggle to pay their mortgages?


2. No. Since they had already lent/distributed this money to the people with mortgages who spent it on vacations and jetskis. These first and second mortgages or even refi's were taken out at inflated home values. You can't blame the lenders on this.

Why can't the lenders be blamed for this? My understanding is that they found some sneaky ways to get around the government regulations that were set up to prevent just this sort of thing from happening. I have also heard that the government loosened the regulations and made it easier for the guys to make high risk loans. So was it the lenders or the government that had a hand in this? Obviously the people who took out these loans were way to optimistic or way to stupid to see the train coming. But I think that they are only partially responsible. It takes two two entities to make a loan.

i'll quote myself from another thread.

"every human being or community has the ability to feed itself, unless of course you might live in the sahara or the middle of the north pole.
has the ability to clothe itself, and help itself.
economic development is nothing more than keeping 1% of the population on top of the rest."

In respose to the question...Was this a 30 billion taxpayer bailout, as some have called it, for a Wall Street firm while people on Main Street struggle to pay their mortgages?



Why can't the lenders be blamed for this? My understanding is that they found some sneaky ways to get around the government regulations that were set up to prevent just this sort of thing from happening. I have also heard that the government loosened the regulations and made it easier for the guys to make high risk loans. So was it the lenders or the government that had a hand in this? Obviously the people who took out these loans were way to optimistic or way to stupid to see the train coming. But I think that they are only partially responsible. It takes two two entities to make a loan.

The blame has to go mostly to the borrowers. Just because someone is offering you something, you don't have to take it. If some bank comes to you and says "well your $100k house is now worth $ 120k, why don't you take $ 15k of that $20k out and enjoy life", and then let's say you bite. That bank is out the $ 15k that they loan to you. Now two years later, you can't make the payments because the loan payment, turns out, is too big for you to handle. I don't understand how you see the banks as screwing the people. You have the power to say no. The banks lost AND the borrowers lost. Well not really the borrowers, because it was not their money to begin with. That's why they are called the "borrowers" and banks are called "lenders".

Now, that $ 15k that you took out of your house, you probably spent it on something and that went back in into the economy. But, you are stuck with a loan that is larger than the value of your house and the bank is stuck ALSO. Since that money went to you anyway, the Feds are willing to save Bear Stearns.

While I agree that those seeking loans should do their homework, the simple fact is that home loans and lending laws are notoriously complicated and difficult to understand, and loan companies take huge advantage of that fact.

Not to mention the fact that they often do break lending laws to create these dream loans.


Fighting Back Against Foreclosure
New York Judge Denies Foreclosure Based on Alleged Predatory Lending

David and Karen Shearon decided to buy their first house so they could give their three children stability and security. It seemed easy: Though they made less than $30,000, the couple was able to put nothing down on a $335,000 house in Staten Island, N.Y.

But within a year, facing rising interest rates and loan payments that were much higher than what they said they were promised, a process server was banging on their door.

"He was trying to make us more embarrassed by screaming it out at the top of his lungs and banging on our door and going, 'The Shearons are in foreclosure! They're in foreclosure!'" David Shearon told ABC News.

But unlike many of the thousands of American families who are on the verge of losing their homes, the Shearons fought back -- and so far appear to be winning.

A New York state trial court judge in February found that the bank that is trying to foreclose on their house violated the state's predatory lending laws. In what lawyers in the case say is the first ruling of its kind in New York, Judge Joseph Maltese denied the bank's bid for foreclosure and ruled that the Shearons may be entitled to a refund of their mortgage payments and attorneys fees.

The case "gave the judge & reason to pause and consider in the current climate what is going on here, not just with these borrowers but with the industry in general," said Noah Pusey, the Shearons' attorney.

Lasalle Bank attorney Tom Solferino said no predatory lending took place and blamed Maltese for misapplying the law. "There's such a thing as predatory borrowing going on," he said. "There are people going out and buying property with no cash down, not making any payment and then pointing the finger at the people who lent them the money."

Maltese has agreed to rehear arguments about his decision to stop the foreclosure, and LaSalle Bank has also appealed.

But among all the talk of subprime mortgages and predatory lending, the Shearons are the uncommon example of consumers who were able to beat the lenders, at least so far. In several states, home buyers are beginning to successfully fight off foreclosure in court.

"There are some people who are clearly victims of fraud, and judges are reacting differently," said James Tierney, Maine's former attorney general and the director of the National State Attorneys General Program at Columbia Law School, who was not familiar with the Shearons' case. "In the meantime, people are losing their homes. A number of judges are saying, fraud is fraud, and we're not going to let this proceed."

When the Shearons bought their house in 2005, they say their mortgage broker told them they would qualify for a fixed interest loan. But at closing, they say they were presented with a high-interest, subprime loan package and balloon interest payments up to 14 percent.

"It was day and night compared to what we asked for, and we had good credit at the time," Shearon said.

But they felt they couldn't back out. The Shearons said they were told they would lose their $5,000 deposit and could be sued if they did not go through with the agreement. And they had already given up their old apartment.

"I feel that I was bullied into accepting the way it was," said David Shearon.

Though the couple made less than $30,000, they borrowed $355,000 for the $335,000 house. The extra money went to pay mortgage costs and fees -- a violation of the state's banking laws, which allow a maximum of 3 percent of a loan to go to paying down fees, according to Maltese.

Maltese also ruled that it was the bank's responsibility to verify that the Shearons were able to repay the loans, even though their bank application said they earned more than they really did, according to the opinion.

Housing law experts say courts nationwide are going to have to face more litigation over predatory lending as more Americans lose their homes.

"Now that we have more awareness of all the abuses that there were in this market, there's closer scrutiny to what was going on," said Jessica Attie, a lawyer with South Brooklyn Legal Services who counsels homeowners threatened with foreclosure. "So it's not a hopeless battle, it's maybe a David and Goliath battle.... We are fighting banks that have a lot more resources than us, but what's happened has been so egregious in so many cases that the battle, it can be won in some cases." --ABC News (http://abcnews.go.com/TheLaw/story?id=4583176&page=1)

Update: The judge heard the appeals and told the lender to take a hike. Here's a video about this victim's triumph over a predatory lender:

http://abcnews.go.com/Video/playerIndex?id=4585739

My point: Don't be so quick to point the finger at the homeowner. Predatory lenders can and do exist, and they have victimized millions. I'm sure there will be many more stories like this to come.

Was this a 30 billion taxpayer bailout, as some have called it, for a Wall Street firm while people on Main Street struggle to pay their mortgages?
It's not the government's responsibility to bail out people who took out mortgages they couldn't afford. Living above one's means is fun and all, but this is the shit that happens when you do that.

It's not the government's responsibility to bail out people who took out mortgages they couldn't afford. Living above one's means is fun and all, but this is the shit that happens when you do that.


Right..and remember, the money was indeed lent to taxpayers. Its not as if the lender ate it up! The Lender lent it to the homeowners, who fucking blew it.

That's not an update Frannie. The case is still open.

That's not an update Frannie. The case is still open.

Watch the video.

It's not the government's responsibility to bail out people who took out mortgages they couldn't afford.

But it damned well SHOULD BE the responsibility of the government to enforce the lending laws such that people are not cheated and hoodwinked by thoroughly dishonest practices like the one described below--

When the Shearons bought their house in 2005, they say their mortgage broker told them they would qualify for a fixed interest loan. But at closing, they say they were presented with a high-interest, subprime loan package and balloon interest payments up to 14 percent.

"It was day and night compared to what we asked for, and we had good credit at the time," Shearon said.

But they felt they couldn't back out. The Shearons said they were told they would lose their $5,000 deposit and could be sued if they did not go through with the agreement. And they had already given up their old apartment.

"I feel that I was bullied into accepting the way it was," said David Shearon.

Though the couple made less than $30,000, they borrowed $355,000 for the $335,000 house. The extra money went to pay mortgage costs and fees -- a violation of the state's banking laws, which allow a maximum of 3 percent of a loan to go to paying down fees, according to Maltese.



--a scenario which is repeated countless times a day in this country.

Shady practices which sewed the seeds for the national predicament this country finds itself in with regards to mortgage/lending.

Watch the video.
I did.

I did.

Did you miss the part where Gibson said "and they won?"

More details (http://www.newyorkinjuries.com/blog/?p=911) on the predatory practices of their lender and the result (they won).

If a couple that made less than $30K a year bought a $355K house.... then they are morons to begin with. The payment on a that house for a 30 year fixed mortgage at 6% APR would be about $25,500 per year unto itself.

Don't fricking try to buy what you cannot afford.

In respose to the question...Was this a 30 billion taxpayer bailout, as some have called it, for a Wall Street firm while people on Main Street struggle to pay their mortgages?



Why can't the lenders be blamed for this? My understanding is that they found some sneaky ways to get around the government regulations that were set up to prevent just this sort of thing from happening. I have also heard that the government loosened the regulations and made it easier for the guys to make high risk loans. So was it the lenders or the government that had a hand in this? Obviously the people who took out these loans were way to optimistic or way to stupid to see the train coming. But I think that they are only partially responsible. It takes two two entities to make a loan.

Your understanding is wrong. No sneaky way was found because they didn't have to be sneaky. Many banks lent the money to people who put little or no money down on the property they bought. That's legal, unfortunately. And both parties, lenders and borrowers, lost money. Most banks have/are taking write-offs to their balance sheets. They are recognizing that money as lost, gone. And the share prices have suffered as well.

a perfect example of economic development keeping the top 1% on top.

:rolleyes: Jim Cayne's net worth went from over $1billion to about $60million. How did bears collapse benefit him or anyone else who owned shares of bear?:rolleyes:

If a couple that made less than $30K a year bought a $355K house.... then they are morons to begin with. The payment on a that house for a 30 year fixed mortgage at 6% APR would be about $25,500 per year unto itself.

Being stupid isn't against the law. Breaking lending laws to take advantage of stupid people, IS.

Did you miss the part where Gibson said "and they won?"
I most certainly did not miss that part. It's the same bit of sensationalist journalism that permeates the news media today. I hear crap like that all the time, and every one offends me. There's no details of appeals, as both the city and the defendant are appealing the decision. Honesty, do you really let two little words said to you by a newscaster dictate your reality?

More details (http://www.newyorkinjuries.com/blog/?p=911) on the predatory practices of their lender and the result (they won).
Again, no details of the appeals process.