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Discussion Forum : News and Current Events : The Dynamics of the 8/9/07 Stock Market Panic ... continue ...

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rookie
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Joined: 2003/6/3
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 Re:

This German bank would have failed just like the American banks...


Germany's IKB to Get Third Bailout for EU1.5 Billion (Update1)

By Aaron Kirchfeld and Andreas Cremer

Feb. 13 (Bloomberg) -- IKB Deutsche Industriebank AG will receive a 1.5 billion-euro bailout ($2.2 billion) led by the German government, the third rescue package for the bank as it reels from U.S. subprime investments.

Germany will provide 1 billion euros in capital to the Dusseldorf-based lender, government officials told reporters in Berlin today. The country's banks should help pay for the rest and talks on how to raise the remaining 500 million euros are continuing, the officials said.

``We have agreed to do everything to ensure that IKB can stay in business,'' Economy Minister Michael Glos told reporters in Berlin. ``Part of the agreement is an appeal to banks to make their own contribution to help create the preconditions which would enable us to keep IKB alive.''

The rescue package will bring total financial aid to IKB to about 7.7 billion euros. The bank became the first German casualty of the worst U.S. housing market in a quarter century, which has led the world's biggest banks to post more than $145 billion euros in writedowns and loan losses.

``An insolvency of IKB would have had unforeseeable consequences on the German financial market,'' Finance Minister Peer Steinbrueck told reporters. Glos and Steinbrueck are the chairman and deputy head of KfW Group, the state-owned development bank that controls IKB.

IKB has dropped almost 60 percent in Frankfurt trading in the last six months, cutting its market value to 514 million euros.

Stake Sale

The bank and its finance affiliates received about 6.15 billion euros in aid last year from Frankfurt-based KfW, which owns about 38 percent of IKB, and German banking associations. KfW alone has committed 4.95 billion euros, depleting most of its special fund for banking risks.

KfW plans to sell its IKB stake and started the sales process on Jan. 18. The 11.8 percent stake owned by Stiftung Industrieforschung will also be part of the offering. The German government estimates it will raise about 700 million euros from the holding, lawmaker Christine Scheel, who is also a member of KfW's administrative board, told reporters in Berlin.

An agreement on the bailout was necessary because IKB needed 500 million euros immediately to have sufficient capital to fulfill demands by German financial regulator BaFin to avoid insolvency, Scheel said. BaFin President Jochen Sanio threatened to close the bank last week if it didn't quickly receive new capital, Handelsblatt newspaper reported.

Need for Capital

The German lender faced near collapse in the summer when Rhineland Funding, a finance affiliate, couldn't raise money because investors were shunning debt backed by assets such as subprime loans. Four IKB management board members, including Chief Executive Officer Stefan Ortseifen, were relieved of their duties last year after an audit found the crisis was a result of ``flawed'' risk management.

IKB needs new capital because the price of structured credit products has declined amid the subprime crisis. The German bank has about 22 billion euros invested in such debt, including 16 billion euros held by two conduits and 6 billion euros at the bank itself, according to Deutsche Bank analyst Alexander Hendricks.

IKB warned in September that it may post a loss of as much as 700 million euros for the fiscal year ending March 31, 2008, and said future earnings will be ``significantly lower'' than in previous years as it curtails investments in international securities funded by commercial paper.

(end of article)

The scales are changed to save this corrupt system.

In Christ
Jeff


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Jeff Marshalek

 2008/2/13 14:55Profile
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 Re:

Florida schools flee troubled bond market
The auction rate bond market is under fresh scrutiny after the $330 billion market’s recent breakdown cost issuers thousands of dollars in extra interest costs. California and the Port Authority of New York and New Jersey are among the entities pulling out of the market, Bloomberg reports, while the Wall Street Journal reports that lawyers and regulators are looking at possible actions on behalf of aggrieved issuers and investors.

The auction rate market allowed cities, school districts and the like to issue long-term debt at lower short-term rates by regularly allowing holders to sell their bonds at auction. But it now seems that Wall Street dealers such as Citi (C) and Merrill Lynch (MER) were among the biggest buyers of the bonds - and now that they have pulled back, in a bid to protect their strained balance sheets, there’s little demand for the bonds. That’s why auctions have failed in recent weeks, briefly saddling highly rated issuers such as the Port Authority with rates as high as 20 percent. Bloomberg reports that the Port Authority now plans to get out of the auction rate market within six to eight weeks while redeeming some $200 million worth of debt that ended up carrying higher rates. Also refinancing are schools in Florida and a medical center in Washington state. As for individuals, investment adviser Michael Shedlock at Sitka Pacific suggests holders of muni bond funds that own auction-rate securities should get out while the getting’s good.


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Jeff Marshalek

 2008/2/22 8:03Profile
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 Re:

Auction Supply `Tsunami' Portends Municipal Losses (Update1)

By Michael McDonald

March 3 (Bloomberg) -- U.S. states and local governments may extend the worst slump in municipal bonds on record as they replace as much as $166 billion of auction-rate securities.

California, Boston's biggest hospital and Duke Energy Corp. are converting their bonds to other types of tax-exempt debt after auction failures drove rates as high as 20 percent. The potential supply equals almost 40 percent of the municipal securities sold last year, overwhelming a market that tumbled 4.9 percent last month, according to indexes maintained by Merrill Lynch & Co., which began compiling market data in 1989.

Rates increased last month as investors shunned the securities on concern the insurers that guaranteed the debt may be downgraded, and as dealers refused to buy bonds that went unsold at auctions. The higher borrowing costs are squeezing states and towns just as slowing growth threatens to cut revenue.

``It's a supply tsunami,'' said Robert Fuller, principal of Capital Markets Management LLC in Hopewell, New Jersey, a financial adviser to municipalities. ``All of that is going to be redone, and it's going to be redone fast,'' he said of auction-rate bonds.

Twenty-one states face budget deficits in fiscal 2009, including 16 that are short at least a combined $30 billion, according to the Washington-based Center on Budget and Policy Priorities.

Jefferson County

Standard & Poor's slashed the ratings on $3.2 billion of debt issued by Jefferson County, Alabama, to below investment grade on Feb. 29, citing costs from auction-rate and other bonds and interest-rate swaps used to finance its sewer system.

``The county can provide no assurance that net revenues from the sewer system will be sufficient to permit the county to meet the interest rate and amortization requirements of the liquidity facilities,'' officials said in a notice last week.

For at least a decade, auction-rate bonds allowed municipalities, closed-end funds and student lenders to borrow long term while getting short-term rates with securities whose yields are reset by bids every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and rates are set at a level determined in official statements issued at the initial bond sale. Investors are suddenly left holding securities they may have wanted to sell.

Municipalities sold about $166 billion of the bonds, or half the $330 billion total, according to estimates by Bank of America Corp.

Failure Rate

The market started falling apart last month as banks from Goldman Sachs Group Inc. to Citigroup Inc. permitted thousands of auctions to fail by not buying bonds that went unsold. At least 60 percent of auctions haven't attracted enough bidders since Feb. 13, based on Bank of America and Bloomberg data. There were fewer than 50 failures in total from 1984 through 2007, Moody's Investors Service said.

``We're in a brave new world right now,'' said Ross Berger, head of proprietary municipal credit and a portfolio manager at Wells Fargo Bank in San Francisco.

Yields on top-rated, fixed-rate bonds due in 30 years reached 4.89 percent on Feb. 28, the highest since August 2004, based on data from Municipal Market Advisors. A Bloomberg index of variable-rate demand note yields jumped almost 2 percentage points to 3.17 percent last week.

Market Anomaly

Municipal yields are rising as those on Treasuries fall, creating a market anomaly, since local government debt is exempt from taxes and bonds sold by the federal government isn't. Top- rated, 30-year municipals offered yields last week that were 10 percent higher than Treasuries of comparable maturity, the most in more than 11 years, Citigroup strategist George Friedlander said in a Feb. 29 report.

Hedge fund managers sought to sell as much as $3 billion of municipal securities last week, traders said. ``Bids wanted'' totaled $1.1 billion on Feb. 29, after averaging $600 million the past 90 days, according to a Bloomberg index.

The auction-market fallout has spread to student loan organizations and corporations. The Pennsylvania Higher Education Assistance Agency, the second-largest seller of auction-rate debt for the past seven years, said it will stop making student loans after paying $24 million in extra interest. Louisiana-Pacific Corp., the Nashville, Tennessee-based lumber company, said last week it will take a charge of about $46 million to $54 million to write down its investments in auction- rate securities.

California Converts

California, the biggest municipal borrower, is exploring ways to replace $1.25 billion of auction-rate bonds after yields on some of the debt almost doubled to 6 percent. States including Wisconsin are also working on plans to convert their high-cost debt, as are agencies such as the New Jersey Economic Development Authority.

The board of Charlotte, North Carolina-based Duke Energy last week approved plans to replace $883 million in auction-rate securities that its utility subsidiaries sold in the municipal market. Boston's Partners Healthcare System Inc. this week plans to begin converting $150 million into variable-rate demand notes, which unlike auction securities permit investors to ``put'' the bonds back to the issuer or liquidity provider.

Partners, Boston's largest hospital system, is also exploring replacing another $300 million in auction bonds. Some issuers are preparing to refinance debt with another form of variable-rate bonds and others are considering selling fixed- rate debt.

``When you've got many issuers representing hundreds of billions of dollars trying to restructure their bonds all at once, there's obviously a glut,'' said Paul Rosenstiel, California's deputy treasurer. ``It doesn't make for any easy solutions.''


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Jeff Marshalek

 2008/3/3 10:13Profile
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 Re:

Citigroup May Need Cash as Losses Mount, Dubai Says (Update2)

By Will McSheehy and Matthew Brown

March 4 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, may need additional capital from outside investors as losses stemming from the collapse of the U.S. subprime mortgage market increase, the head of Dubai International Capital LLC said.

Citigroup received $7.5 billion in November from Dubai's neighbor, Abu Dhabi, after record mortgage losses wiped out almost half the company's market value and led to the departure of Chief Executive Officer Charles Prince. The New York-based company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait.

``It will take a lot more than that to rescue Citi and other financial institutions,'' said Sameer al-Ansari, the chief executive officer of Dubai International, at a private-equity conference in Dubai today. Dubai International is among the investment funds controlled by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum.

Citigroup probably will report a first-quarter loss of $1.66 a share after $15 billion of mortgage-related writedowns, Merrill Lynch & Co. analyst Guy Moszkowski said in a report issued today. The company also may have $3 billion of markdowns from loans used to finance leveraged buyouts and commercial real estate, Moszkowski estimates.

Sovereign Funds

Citigroup slumped 54 percent in New York trading during the past 12 months. The stock fell 30 cents today to $22.79 in German trading.

Moszkowski also cut his earnings estimates today for Bank of America Corp., the second-largest U.S. bank by assets, and Wachovia Corp., the country's No. 4 bank, because of the deteriorating credit markets. Both companies are based in Charlotte, North Carolina.

Arab states led by Qatar, Kuwait and the United Arab Emirates, which are loaded with cash from record oil and gas revenue, have purchased stakes in U.S. and European financial institutions, including Merrill Lynch & Co., Morgan Stanley and UBS AG, as losses mounted from the U.S. mortgage market.

In all, banks and securities firms have so far raised about $105 billion from sovereign wealth funds, governments and public investors, according to data compiled by Bloomberg. Dubai International has invested in companies including London-based HSBC Holdings Plc, Europe's biggest bank by market value, and New York-based hedge fund Och-Ziff Capital Management Group LLC.

``Gulf sovereign wealth funds will continue to be interested in the major U.S. financial institutions,'' said Giyas Gokkent, the head of research at National Bank of Abu Dhabi, the third- largest bank in the United Arab Emirates by market value. ``The scope for investments is going to be more limited than what we have seen so far.''

Prince Alwaleed

Qatari Prime Minister Sheikh Hamad bin Jasim bin Jaber al- Thani said Feb. 18 that the emirate is buying shares of Zurich- based Credit Suisse Group and plans to spend as much as $15 billion on European and U.S. bank stocks in the next year.

Abu Dhabi is Citigroup's largest shareholder, ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, Bloomberg data show.

The assets of state-managed funds have increased to $3.2 trillion, fueled by record oil prices and rising currency reserves. Analysts at New York-based Morgan Stanley estimate the funds' assets will reach $12 trillion by 2015.

(end of article)


Our banking system would fail if it wasn't for these Arab investment fund's cash infusions. They would fail because of their love of money...


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Jeff Marshalek

 2008/3/4 8:21Profile









 Re:

We do pray for America, but think about it, should we? what exempts us from the troubles brought about by disobedience and false Gods....

Now it is said that religion or rather people are changing faith, I do not know what God has in store for us, but I do not think that we will escape.

If we do, then I am all the more grateful for it to God....let us pray brethren




 2008/3/4 8:46
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 Re:

The greed of these big corporations is appalling.
there will always be greed but this is greed on steroids.

They think,turn up the profits a little higher,higher higher.
"what goes up must come down"
this is true with our walk. "for God opposes the proud"

This financial house of cards has become a monster.
It will carry all who want a ride into the desert and then roll over and die.
Thank you Jesus for your provision.

TRUST HIM AND WATCH THE WICKED LAMENT FOR THEIR DEAD god.

David

 2008/3/4 10:44Profile
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 Re:

CNBC
Billionaire Investor Sees Bank Failures Ahead
Monday March 10, 10:52 am ET


Billionaire investor Wilbur Ross says the current market downturn differs from previous slumps in that no American banks have yet failed this time, but he suggests that's about to change.
"I think that's going to be the next wave, and coupled with problems in the commercial real estate market; I think they'll be the next bubbles that burst," the chairman and CEO of W. L. Ross and Company told CNBC's "Squawk Box" in an exclusive interview.


He was asked about the risks to big banks.

"I think that the big banks won't fail in the sense that they will go to zero and depositors would lose money," Ross replied. "I think the Fed and other regulators will make things happen.| I think it's the medium-sized banks, and particularly some of those that got overextended with the subprime and other kind of mortgage debt.| I think those are the ones that had the serious mismatch, making 20- and 30-year loans based on 90-day deposits."

Ross's comments echo those made by Federal Reserve Chairman Ben Bernanke, who told a Senate committee on Feb. 28 that some smaller regional banks that heavily invested in real estate could go under.



Ross and other high-profile investors have made recent moves in the credit markets, explaining that they have done so to snap up bargains. Last week it was reported that Ross had invested $1 billion into municipal bonds.

In the meantime, Ross said he didn't think the U.S. economy would recover any time soon.

"I think at best we're in for stagflation," Ross said, referring to the combination of higher inflation and weak economic growth. "I think the consumer has been tapped out for quite a while and is frightened by the poverty effect of seeing the house go down."

Straightening out the problems in the bond industry, particularly the situation of the insurers who backstop bond offerings, would go a long way toward fixing the current paralysis in the credit markets, Ross intimated. That process is underway, he suggested, with the current reassessment by ratings agencies of the bond insurers.

"Making real triple-As will solve a lot of the problem," he said. "The problem is we've had a lot fake triple-As before."|



That effort is far from over, indicated New York State Insurance Commissioner Eric Dinallo, who has been at the center of efforts to stabilize the sector. Troubled bond insurers MBIA (NYSE:MBI - News) and Ambac (NYSE:ABK - News) successfully raised fresh capital last week, he noted. Now attention now turns to FGIC, he said, also during an appearance on "Squawk Box."(Read more here).


(end of article)

The big banks are not subject to free market principles. They will be saved from failure...


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Jeff Marshalek

 2008/3/10 12:34Profile
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 Re:

Stocks Soar After Fed Credit Plan
Tuesday March 11, 10:00 am ET
By Joe Bel Bruno, AP Business Writer
Wall Street Moves Sharply Higher After Fed, Other Central Banks Move to Ease Credit Crisis


NEW YORK (AP) -- Wall Street rebounded sharply Tuesday after the Federal Reserve and other central banks said they will pump $200 billion into the financial markets to help ease the strain from the credit crisis. The Dow Jones industrials surged nearly 250 points.
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The program is part of a worldwide effort to help struggling banks and mortgage providers. The Fed -- acting in concert with the European Central Bank, the Bank of Canada and the Swiss National Bank -- agreed to loan banks money in exchange for debt that includes slumping mortgage-backed securities.

The Fed's latest move was seen as a direct boost to struggling banks by avoiding having to dramatically slash interest rates when the central bank's policymaking Open Market Committee meets next week. Economists continued to be concerned about the unrelenting rise in oil prices and the dollar's weakness, which contribute to inflation -- and cutting rates only add to these pressures.

"The big problem has been the financials, and this helps supply money directly to the banks and may take some of the need for aggressive rate cutting off the table," said Peter Dunay, chief investment strategist at Meridian Equity Partners. "The Fed is basically going to take the bad loans off the banks' books, and the market seems to be loving that idea."

...........................


Let the bailout of the king's sons begin....


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Jeff Marshalek

 2008/3/11 10:15Profile
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 Re:

How a lender bailout hurts the economy
The Federal Reserve's efforts to ease the credit crunch risk stoking inflation - and letting reckless, well-paid execs off the hook.
By Colin Barr, senior writer





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NEW YORK (Fortune) -- The government is showing considerable ingenuity in devising new tactics to fight the credit crunch. But some observers fear that the innovations risk making matters worse - by fueling inflation and insulating executives who made reckless bets from the full wrath of the market.

The Federal Reserve set off a ferocious stock market rally Tuesday with its plan to lend banks as much as $200 billion over 28 days later this month. The plan sent shares of hard-hit lenders such as Fannie Mae (FNM), Freddie Mac (FRE, Fortune 500) and Washington Mutual (WM, Fortune 500) soaring, because the Fed will allow borrowers to use privately issued mortgage-backed securities as collateral. Investors have fled those securities because they see a rising risk that mortgage bonds will become impaired as housing prices slide and defaults tick higher.

Tuesday's plan, dubbed the Term Securities Lending Facility, wasn't the first Fed move aimed at loosening up the debt markets. Late last year the Fed rolled out a similar plan called the Term Auction Facility that briefly succeeded in bringing down the interest rates banks charge one another for overnight loans.

"Think of Ben Bernanke as action hero," Felix Salmon wrote this week at Portfolio.com. "Every time the credit markets seize up and threaten to bring down the U.S. financial system, he pulls out a new weapon."

Not quite a fan club
Not everyone is a fan of Action Ben, however. David Rosenberg, chief North American economist at Merrill Lynch (MER, Fortune 500), wrote Wednesday that this week's Fed action will do little to counter the impression that Bernanke & Co. is struggling with problems that the Fed ultimately has little control over.

"This latest experiment, as with the others undertaken thus far, does not address underlying credit problems, does not materially improve the solvency of the institutions exposed to assets under stress, does nothing to put a floor under home prices," Rosenberg wrote in a note to clients. "We see no reason based on this for anyone to change their economic or earnings outlook despite the stock market's initial reaction to this latest initiative."

Rosenberg, who has been predicting for some time that the economy will slip into recession this year, expects the Fed to cut its fed funds rate to as low as 1% later in 2008, down from 3% now and 5.25% back in August. Observers expect the rate cuts to continue next week, with a cut as deep as 75 basis points at the Fed's regularly scheduled meeting. But there's little optimism that the cuts will do anything to stimulate demand for houses, which remain pricey by historical measures, or even bring down mortgage rates, which have been rising since the Fed's slashed rate by more than a percentage point over eight days at the end of January.

The fear is that by expanding its emergency lending programs and sharply cutting rates, the Fed will turbocharge already healthy parts of the economy - at the cost of reduced purchasing power by dollar holders. Meanwhile, the big problem - bad loans tied to houses whose value is now declining - continues to fester.

"We're in the helicopter phase now," says Howard Simons, a strategist at Bianco Research in Chicago. He references the nickname Helicopter Ben, which Bernanke got tagged with after a 2002 speech on how central banks can steer away from deflation by dropping money into the economy.

Simons says he appreciates the Fed's need to make sure the economy has sufficient liquidity. But with gasoline prices approaching an all-time inflation-adjusted high and the price of milk having jumped 12% last year, inflation "is a very real concern," Simons says.

Betting on inflation
He points to the action in Treasury Inflation Protected Securities - bonds whose principal amount is adjusted upward when the consumer price index shows inflation and drops when it shows deflation. The yield on five-year TIPS recently turned negative - meaning that investors buying the securities now are accepting a lower interest rater than they would get on comparable Treasury notes, in the expectation of making up the difference in coming years via the inflation adjustment. In essence, they are betting that buying TIPS will shield them from the loss of purchasing power they would suffer over time by holding nominal Treasurys.

David Merkel, chief economist at broker-dealer Finacorp Securities, agrees that inflation is worrisome but adds that the makeup of the current board of governors ensures the Fed will "err on the side of inflation." Along with Bernanke, Fed Vice Chairman Donald Kohn and governor Frederic Mishkin "are students of the Great Depression," Merkel says. "So you're going to see more loosening" of monetary policy when the economy runs into trouble.

Inflation isn't the only worry on the minds of Fed critics. Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says the Term Securities Lending Facility and moves like it amount to a government bailout of corporate executives who made reckless bets - and who should be made to pay the tab with their jobs.

"The Fed's actions are keeping banks from having to write down large losses and quite likely go into bankruptcy," he writes on his blog at the American Prospect. "The result is that the bank executives, whose inept management pushed them into bankruptcy, get to keep their jobs and their salaries, which run into the tens of millions a year." Meanwhile, homeowners facing foreclosure - not to mention ordinary savers who are watching inflation erode the value of their nest eggs - remain quite unbailed-out.

Simons says the whole mess points up the limitations of the Fed. "They're not crisis managers," he says. "There's no playbook for this."

(end of article)

The banks lent with no regard to the ability of the borrower to pay back. The assets were artificially inflated beyond any reason. The only reason, of course, is greed.

And now those who pay taxes will be required to support the "leaders" of this country who created this moral abyss....

The only hope is Christ...




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Jeff Marshalek

 2008/3/13 8:30Profile
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 Re:

JPMorgan Chase Funding Bear Stearns
Friday March 14, 9:32 am ET
JPMorgan Chase, With Federal Reserve Bank of NY, to Provide Funding to Bear Stearns


NEW YORK (AP) -- JPMorgan Chase says that in conjunction with the Federal Reserve Bank of New York it will provide temporary funding for Bear Stearns.
The funding will be provided as necessary for up to 28 days. During that time, JPMorgan Chase will also help Bear Stearns find permanent financing.

Bear Stearns says its liquidity significantly deteriorated over the past day and the temporary funding will help it continue operating normally. The investment bank added there is no guarantee any permanent strategic alternatives will be successful.

There has been speculation this week that Bear Stearns was struggling with liquidity problems.

Bear Stearns shares spiked in premarket trading but then fell back on the news.

(end of article)

In other words, if Bear Stearns was subject to free market principles, they would declare bankruptcy today....






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Jeff Marshalek

 2008/3/14 10:00Profile





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