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March 15, 2008
Financial lambs bleating in the desert
The great economic historian Richard H. Tawney once wrote:
"Few tricks of the unsophisticated intellect are more curious than the naive psychology of the business man, who ascribes his achievements to his own unaided efforts, in bland unconciousness of a social order without whose continuous support and vigilant protection he would be as a lamb bleating in the desert."
Something to ponder as the Wall Street elite, some of the highest paid individuals in our economy, place urgent calls to the New York Branch of the Federal Reserve:
"The rescue effort began late Thursday evening, when Alan D. Schwartz, Bear Stearns's chief executive, placed an urgent call to James Dimon, his counterpart at JPMorgan Chase. Mr. Schwartz said Bear Stearns was struggling to finance its day-to-day operations, according to several people briefed on the negotiations, a situation that would threaten its survival. Because JPMorgan settles transactions for Bear Stearns as its main clearing bank, it was in a good position to assess the collateral that Bear Stearns could provide against a loan. But Mr. Dimon insisted on the support of Timothy F. Geithner, president of the New York Fed. Mr. Geithner quickly agreed to the plan."
Floyd Norris of the New York Times discusses the financial system that has outgrown the regulations once designed to prevent its collapse.
Also from the New York Times an explanation why the Federal Reserve intervened to which Dean Baker responds that the taxpayer in a blink of the eye just bailed out Bear Stearns Shareholders.
The Wall Street Journal has the most detailed recount of the Bear Stearns bailout.
In other news:
Obviously its purely a coincidence that Toll Brothers, the PA based homebuilder, submitted a plan to allow bonus payments to its CEO on factors other than the firms financial performance and the fact that one of its major joint ventures in Las Vegas is under significant financial stress.
--Mark Price
Posted by Price at March 15, 2008 07:45 AM