Overdue comeuppance for Bear Stearns

It took over nine years, but Bear Stearns finally got its comeuppance for refusing to lend a hand in the bailout of LTCM back in 1998. The Federal Reserve Bank of New York had helped to "orchestrate" the bailout of LTCM and had been able to convince the other major players that they stood to lose a lot more than the amount of money they needed to invest to bail out LTCM. Bear Stearns was the lone hold out. Some memories never die and this was probably one of them.

I won't go so far as to suggest that other Wall Street players orchestrated the undermining of Bear Stearns as a form a payback for their lack of action back in 1998, but it certainly is possible. It is likely that some of those old players at least turned a blind eye to the deterioration of Bear Stearn's financial condition and even smiled inwardly as they watched the decline and opted to refrain from offering any assistance when they could have actually helped in some manner.

You can read JPMorgan's press release about their takeover of the remains of Bear Stearns.

JP may be paying only $2 per share, but that is because they will be taking on vast boatloads of liabilities even as they also get significant remaining assets of value. The Federal Reserve Bank of New York is in fact helping out and loaning JP money based on remaining Bear Stearns financial assets of value. JP will then gradually unwind those old Bear Stearns liabilities by writing off the garbage (hard-core subprime debt) and repackaging and reselling any quality debt securities. The interesting effect will be that writing off a lot of "bad" subprime debt will effectively let a lot of holders of underwater mortgages off the hook. This could be a really good deal for a lot of people in the months ahead.

Personally, I never had any business with Bear Stearns, but that was mostly since they never catered to "main street" individual investors such as myself.

To me, Bear Stearns (as well as Goldman Sachs) represented the epitome of the "bad" side of Wall Street which was always more enthusiastic at profiting from us individual investors than helping us profit.

So, I say, Bear Stearns... good riddance.

The Bear Stearns web site has this message:

BEAR STEARNS FIRST QUARTER EARNINGS ANNOUNCEMENT SCHEDULED FOR MARCH 17, 2008 WILL NOT OCCUR

Gee, I wonder why?! The site goes on to tell us that:

In light of entering into an agreement to merge with JPMorgan Chase, The Bear Stearns Companies Inc. (NYSE: BSC) will not be announcing its first quarter 2008 financial results on Monday, March 17, 2008, as previously scheduled.

Almost as if they were writing an obituary (which they should), the announcement ends by telling us:

Bear Stearns

Founded in 1923, The Bear Stearns Companies Inc. (NYSE: BSC) is a leading financial services firm serving governments, corporations, institutions and individuals worldwide. The Company's core business lines include institutional equities, fixed income, investment banking, global clearing services, asset management, and private client services. Headquartered in New York City, the Company has approximately 14,000 employees worldwide. For additional information about Bear Stearns, please visit the firm's website at www.bearstearns.com.

All of this said, I was never a big fan of Chase or JPMorgan Chase either, or of any big banks, but at least they have retail operations and at least some sense of needing to cater to "main street" individual investors.

For now, most of my financial transactions occur through Fidelity Investments.

 -- Jack Krupansky