Bear Stearns Fails - Bailed out by FED Reserve for 28 days

[robertsondavies]

wow...

i guess it looks like the end of the 'buy and hold' century, post war expansion, world by the arse period our parents enjoyed is definitely ending...

If the baby boomers pull their money out of the stock market, we'll see panic selling worse than 1987.

[Mango]

It'a already happening for this boomer. Ironically, today Dubya speaks at the Economic Club of New York. ``Americans should have confidence that this economy will return to stronger growth,'' said White House spokesman Tony Fratto. ``You shouldn't look for new major announcements.''

Like who was looking for him to say anything intelligent to start out?

And even with all of Spitzer's arrogance everyone speaks of, at least he tried to do something in 2003 to curb the inevitable mess we are in today.
http://www.washingtonpost.com/wp-dyn...302783_pf.html

While everyone was so tuned into the Spitzer scandal, everyone failed to notice that General Fallon resigned.
I for one am very scared as to where this Country is headed.

[Little Fish]

Don't hold your breath waiting for widespread panic. We are nearing the end of the credit crisis. IMO, the economy will rebound in the next twelve months due to the massive stimulus that the Fed has organized. Fed Fund rates have declined 40% since last September and this will have a huge impact on the economy.

Remember the old saying... "when there's blood in the streets, buy property".

Little Fish

[Mango]

Sit in your chair again Little Fish.
I considered the cyclical nature of the markets and the coinciding affects, and had a similar thought as you, for about 5 minutes. Then I remembered that we will have a change of administration. Typically the markets stay stagnant for at least 6 months, not to mention burned once, twice shy in both real estate and financial markets.

[TooFarTampa]

Don't hold your breath waiting for widespread panic. We are nearing the end of the credit crisis. IMO, the economy will rebound in the next twelve months due to the massive stimulus that the Fed has organized. Fed Fund rates have declined 40% since last September and this will have a huge impact on the economy.

Remember the old saying... "when there's blood in the streets, buy property".

Little Fish

I'm no expert, but aren't they infusing the economy with new cash, thus increasing inflation? The dollar isn't going to be in any better shape anytime soon then ... right?

[Little Fish]

TFT:

It appears clear the Fed has placed inflation fighting on the back burner in order to mop up the credit crisis before it spills over into world markets. Greenspan has been criticized for leaving rates too low for too long, which lead to the asset price bubbles the market is currently grappling with.

Bernanke will surely learn from this and begin raising rates as soon as he can. If he learns from Greenspan, it is possible that Bernanke will begin raising rates to stem inflation in as early as the first quarter of next year. Remember it takes time for the lowered rates to effect the economy. However, there is little doubt in my mind that the lowered rates will cause the market and economy to come roaring back.

Here is an interesting tidbit...

The S&P peaked on 09/09/07 at 1565. On 03/10/08, the S&P hit a low of 1273. This represents a decline from peak to trough of 18%. The decline took 5 months.

I recently read a research report on the typical recovery pattern for the S&P. From 1945 - 2007, given a market decline between 15-20%, the average decline was 18%. For a decline of this magnitude, on average, it took 4.3 months from peak to trough. From trough to peak (full recovery) it took an average of 5.7 months, leading to a full recovery in 0.8 years.

Assuming we don't break down to new lows, it appears the current market characteristics closely mirror the historical average decline. The current correction is nothing new and is witnessed every four years or so. Therefore, I'd rather hold tight than sell near the bottom.

Little Fish

[YoungFT]

To my fellow Atlantan, Little Fish, thanks for the dose of optimism!

I recently read a research report on the typical recovery pattern for the S&P. From 1945 - 2007, given a market decline between 15-20%, the average decline was 18%. For a decline of this magnitude, on average, it took 4.3 months from peak to trough. From trough to peak (full recovery) it took an average of 5.7 months, leading to a full recovery in 0.8 years.

I can't help but recall my statistics professors' warning on using "averages". On average, we're all neuter.

[Here4Good]

While everyone was so tuned into the Spitzer scandal, everyone failed to notice that General Fallon resigned.
I for one am very scared as to where this Country is headed.

I noticed that General Fallon resigned, and I noticed the reason.

One of these days W and his henchmen are going to figure out that it is REAL hard to find a competent military man who is also willing to serve as a fall guy.

They MIGHT actually have to let one run his own shop someday.

[robertsondavies]

Little Fish,

following dictums and averages and sayings are troublesome.

there was 'blood in the streets' yesterday as Bear Stearns fell from $170 per share a few months ago, to $85 two days ago, to $55 yesterday... to the brave people that bought yesterday while there was blood in the street, well, today.... more blood - much more. Bear Stearns is changing hands between $26 and 36 a share for the last 4 hours.

There is another saying on wall street having to do with trying to not catch falling knives....

The good news is I don't listen to sayings, i only follow my gut when i put my poker chips down, and so I bot some BSC this morning at 34, at 33, and at 31. Please do not try this at home, BSC could be a zero....

you can all poke fun at me on Monday, or maybe even this afternoon, when BSC really starts to do a death dive -

Don't hold your breath waiting for widespread panic. We are nearing the end of the credit crisis. IMO, the economy will rebound in the next twelve months due to the massive stimulus that the Fed has organized. Fed Fund rates have declined 40% since last September and this will have a huge impact on the economy.

Remember the old saying... "when there's blood in the streets, buy property".

Little Fish

[goofer44]

I worked at Bear Stearns from 1983 until 1991. I have stayed in touch with many people there. All of the people I have spoken to are in shock as well as quite a bit poorer !!! Many of these people who have worked there for 30 plus years will lose their jobs if JP MORGAN absorbs them, and they will never get jobs again in the securities industry because the business has changed dramatically.

[robertsondavies]

I spoke with a couple current employees today... you're certainly right about the shock etc... it is very sad..

and the way Bear Stearns comps people, they are forced to take a large chunk in stock, which vests over periods of years... in addition, even upon vesting, it is 'frowned upon' to sell shares.. so many rank and file employees have lost millions and millions in the last year or so, on the stock.. and half those losses in the last three days..

apparently all the line managers are gearing up their powerpoints, to stay at their HQ all weekend to do a beauty show - and receive a bid by Monday -

i hope its not a "takeunder" bid.

p.s. bot more at 31 and 30 and 29.. YIKES

[Babyblue]

I cannot believe the Fed is bailing them out. Bail out the poor janitor that lost his job in South Florida due to the budget cut backs.

[SHELLY]

I cannot believe the Fed is bailing them out. Bail out the poor janitor that lost his job in South Florida due to the budget cut backs.

This little Bear Stearns issue pales in comparison to what is coming down the pipe.

Earlier in the week the Fed goosed the market by announcing it will swap treasuries (...uh "loan" treasuries for 28 days at a pop ), to cash-strapped banks and investment houses, and accept "nonrecourse" home-loan packages as collateral to backup these loans

So those Federal Reserve Notes (aka: US Dollars) which are backed by "the full faith and credit of the U.S. government"— will now also be backed by the "full faith and credit of subprime mortgages."

[Miss Critter]

Wow, that video is hilarious, insightful, clever and terrifiying, all at once.

Hard not to get increasingly cynical in my old age.

[goofer44]

The deal for Bear Stearns by J.P. Morgan works out to $2 a share. There is going to be a CRASH on Wall Street tomorrow.

[Little Fish]

Robertsondavies:

Very sorry to say that BSC is being purchased by JPMorgan for $2/share... This is unbelievable.

http://biz.yahoo.com/rb/080316/bearstearns.html?.v=6

Little Fish

[elgordoboy]

Robertsondavies:

Very sorry to say that BSC is being purchased by JPMorgan for $2/share... This is unbelievable.

http://biz.yahoo.com/rb/080316/bearstearns.html?.v=6

Little Fish

wow

[sandybanks]

I noticed that General Fallon resigned, and I noticed the reason.

One of these days W and his henchmen are going to figure out that it is REAL hard to find a competent military man who is also willing to serve as a fall guy.

They MIGHT actually have to let one run his own shop someday.

I saw that the other day and my heart dropped. I guess we will be in Iran by the middle of the summer.

Admiral Fallon was a true American who had more sense than any military leader we have had in quite some time.

[elgordoboy]

What is the risk in this for JPM? With the fed backing the "less liquid" assets? Would this be a good time for going long JPM as they are said to be less exposed to the overzealousness of recent past?

[robertsondavies]

i need a mojito .. $2 is a real surprise..

i know many people who worked there, and have a good chunk of life savings tied up in BSC stock.. i lost on my speculative trade from Friday to Monday, it appears 95% of my bet was lost, and it stings to lose any time, but this was pure gambling -

people are going to panic now... and think Lehman is next. etc etc.... capital preservation, boomers pull their money out of the markets - and voila, we have not just a bear market, but a deep recession....

the recession of 2002 and the recession of 1991 did not take down our biggest investment banks did it? This looks to be worse than a 70's style recession

look out below.

i'm going back to cash.. going to sell the JOE, going to cover the CROX

[elgordoboy]

I saw that the other day and my heart dropped. I guess we will be in Iran by the middle of the summer.

Admiral Fallon was a true American who had more sense than any military leader we have had in quite some time.

I saw this stated by your Dr. Roberts. I am going to base my thoughts on the rest of his material I was reading on this particular action. If we attack Iran as he and you say then I will not only buy a gun, I will buy a howitzer and build a pillbox in the front yard. If we do not, then I will cease to be alarmed by alarmists henceforth and make cyber-faces (nyah nyah like) at both you and the Dr.

[Capricious]

I do believe that the meltdown has finally arrived.

Strange moves by the Fed such as bail-outs of non-bank
entities and Sunday-evening rate cuts may generate
modest temporary positive reactions from "Wall Street," but the
trend is down.

Anyone care to debate whether or not we are in a recession?




"It's already here !"

Bill Paxton, "Twister," 1996
(Appropriate quote considering the weather of late.)

[sandybanks]

That brought a smile to my face. I hope that Dr. Roberts is wrong, but it doesn't look like it.

If you have money in the stock market, you may want to think about buying some gold and silver coins. It is my opinion this is just starting and will be a bumpy ride for those who leave their money in the markets.

I say this with all sincerity, buy some freeze dried food and store it just in case this thing gets real ugly. I have started preparing about 6 months ago.

If I am wrong you will have some food to go camping with in the future.

[Capricious]

".... $2 is a real surprise..

i know many people who worked there, and have a good chunk of life savings tied up in BSC stock...."




No one learned from Enron?

[YoungFT]

I try to be the optimist and welcome anyone's well reasoned argument for why I should still be optimistic but today's news on Bear Sterns is an indication that the nature of our economy is not a "slowdown" but it is becoming a "full blown catastrophe".


I encourage any of you to look up Prof. Nouriel Roubini's "The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster" He presented this scenario at Davos and has demonstrated frighteningly precise insights to how this has and will continue to unfold. I only hope he took this analysis to the next step and suggested some ways to manage through, but alas, he has not.

In a nutshell, the 12 steps are as follows:

1. A severe recession which he states started in December; more severe and longer than those in the past - housing prices likely to drop 20-30% from peak (STARTED)

2. Extend subprime mess to the broader mortgage mess - this will not only be the LIAR LOANS but all loans with less than 20% equity may find themselves in a negative position (STARTED - Spreads are widening at all quality grades)

3. Mortgage losses will then extend to credit card, auto loan, student loans - large banks and small banks take the hit (STARTED - 4Qbank earnings all pointed to deterioration in credit cards)

4. Monoline credit insurers losses will mount (FITCH, MBIA) driving down values of assets on bank balance sheets, increasing additional losses and hurting the overall stock market (STARTED - while ratings have been affirmed for some, it's only time before that's re-examined)

5. Commercial Real Estate lending gets hit (STARTED - let's see if those large tracts in Walton get sold and closed - even if its people with money who are bidding, you always want to use the bank's money to buy and hold real estate, let's see if it's in the deal)

6. Large regional or national lender goes belly-up (STARTED - look at the stock prices of Nat City or WaMu)

7. The banks start taking large losses on their leveraged loan portfolios that were used to generate many of those LBO transactions these past 3 years (STARTED - Carlyle Group is just the start)

8. Corporate loan defaults will explode in 2008 because of the recession; there are many good corporations out there, but the week ones will find it hard to refinance (STARTED - Spreads are approaching 1000 bps - unheard of rates)

9. The "shadow" financial system gets in trouble. (STARTED - this is the area Bear Sterns played in and one Warren Buffett warned us about - not sure how many of these the Fed will offer to bail out with Banks)

10. Stock market will reach levels that would indicate a severe recession (look for large drops this week after any preventive noise slows down)

11. Credit pricing will seize up and no government intervention will convince banks to start lending again

12. Writedowns, Margin calls, Losses will be a visious cycle - many firms will become insolvent

His final word - while opportunities exist, it appears that one should be prepared for a systemic financial crisis.

http://www.rgemonitor.com/index.php

Other than that, have an amazing Happy St. Patrick's Day!

[cardogpal]

Yikes!!! What scares me is that I have lived through several recessions, but I don't ever recall things coming unglued this fast. Maybe information just moves faster. Might be time to sell everything into a "sucker rally" (if there is one) and try to duck equities exposure altogether for a while. I think I'd rather pay the cap gains and sleep better at night. As this problem continues to spool out, cash will be king (even the beleaguered dollar). Anybody on the forum remember the Penn Square Bank debacle that brought down Continental Illinois and Manny Hanny...?

[TooFarTampa]

Other than that, have an amazing Happy St. Patrick's Day!

After reading this thread again, I think I need to start celebrating NOW.

sorry that you bet and lost robertsondavies ... $2 a share ... wow!

[rapunzel]

This thread is basically terrifying. I keep coming back and checking someone would offer a convincing rebuttal so I can sleep.

[goofer44]

That brought a smile to my face. I hope that Dr. Roberts is wrong, but it doesn't look like it.

If you have money in the stock market, you may want to think about buying some gold and silver coins. It is my opinion this is just starting and will be a bumpy ride for those who leave their money in the markets.

I say this with all sincerity, buy some freeze dried food and store it just in case this thing gets real ugly. I have started preparing about 6 months ago.

If I am wrong you will have some food to go camping with in the future.

These are the sentiments that occur at a bottom. If the mkt is down more than 600 Dow points tomorrow on heavy volume ( more than 4 billion shares ) that could mark the selling climax. Companies like AT&T General Electric Proctor and Gamble Johnson and Johnson Exxon and Pepsi etc are insulated from the credit mess. On Monday I would be bidding for those stocks at 5%-10% below the price they closed on Friday.

[elgordoboy]

This thread is basically terrifying. I keep coming back and checking someone would offer a convincing rebuttal so I can sleep.

Old chinese curse "May you live in interesting times". In my calmer moments I wonder what I really have to be scared of. I have my health. To paraphrase Thoreau (I believe it was he) Security doesn't come from having things, it comes from knowing you can do without them.

[goofer44]

Old chinese curse "May you live in interesting times". In my calmer moments I wonder what I really have to be scared of. I have my health. To paraphrase Thoreau (I believe it was he) Security doesn't come from having things, it comes from knowing you can do without them.

.....A very profound thought by Thoreau, yet so true in its simplicity....

[elgordoboy]

That brought a smile to my face. I hope that Dr. Roberts is wrong, but it doesn't look like it.

If you have money in the stock market, you may want to think about buying some gold and silver coins. It is my opinion this is just starting and will be a bumpy ride for those who leave their money in the markets.

I say this with all sincerity, buy some freeze dried food and store it just in case this thing gets real ugly. I have started preparing about 6 months ago.

If I am wrong you will have some food to go camping with in the future.

Costco- I saw this the other night when browsing for unrelated items:


Basic preparation will impact the probability of your family’s survival in an emergency. Delicious and Easy to Prepare. Each bucket contains 275 servings of Pre-mixed and Pre-seasoned 100 % Vegetarian and Vitamin Fortified food for you and your family. With a 20 year long shelf life, this kit is perfect for the preparation of natural disasters such as hurricane, tornado, earthquakes or even a camping/hunting trip.

• Easy to prepare
• 275 servings
• Sealed in convenient Weather-Proof Bucket for Easy Transport
• 30 Servings - Potato Bakon
• 25 Servings - Corn Chowder
• 25 Servings - Ala King
• 25 Servings - Cacciatore
• 25 Servings - Western Stew
• 45 Servings - Whey Milk
• 25 Servings - Blueberry Pancakes
• 25 Servings - Barley Vegetable
• Total Weight: 23 lbs.0

[TooFarTampa]

Costco- I saw this the other night when browsing for unrelated items:


Basic preparation will impact the probability of your family’s survival in an emergency. Delicious and Easy to Prepare. Each bucket contains 275 servings of Pre-mixed and Pre-seasoned 100 % Vegetarian and Vitamin Fortified food for you and your family. With a 20 year long shelf life, this kit is perfect for the preparation of natural disasters such as hurricane, tornado, earthquakes or even a camping/hunting trip.

• Easy to prepare
• 275 servings
• Sealed in convenient Weather-Proof Bucket for Easy Transport
• 30 Servings - Potato Bakon
• 25 Servings - Corn Chowder
• 25 Servings - Ala King
• 25 Servings - Cacciatore
• 25 Servings - Western Stew
• 45 Servings - Whey Milk
• 25 Servings - Blueberry Pancakes
• 25 Servings - Barley Vegetable
• Total Weight: 23 lbs.0

"Bakon" sounds terrifying.

[SHELLY]

Fed annouced an emergency discount rate .25 cut (lending rate to financial institutions) to 3.25% from 3.50% and creating a facility to let primary dealers borrow at that rate

Overseas markets don't like it a bit! CNBC is airing their Far Eastern program on cable now....they're really worried about what's happening over there.

Hong Kong markets down over 4%

Nikke down over 4%

Gold is up to 1025

Euro is at 1.58

Yen is up again against the dollar (a Yenny doesn't buy as much as it used to--last week)

The US Futures are down, down, down....DOW down over 200; NASDAQ 44; S&P 32.

....Do you know where your Tin Foil Hat is? -- India Markets opening shortly.

.

[Mango]

Perhaps this may ease the mind of some, although I may still stock canned goods and get a gun permit for the hail of it.

http://www.msnbc.msn.com/id/17632793/

[elgordoboy]

Fed annouced an emergency discount rate (lending rate to financial institutions) to 3.25% from 3.50%

Overseas markets don't like it a bit! CNBC is airing their Far Eastern program on cable now....they're really worried about what's happening over there.

Hong Kong markets down over 4%

Nikke down over 4%

Gold is up to 1025

Euro is at 1.58

Yen is up again against the dollar (a Yenny doesn't buy as much as it used to--last week)

The US Futures are down, down, down....DOW down over 200; NASDAQ 44; S&P 32.

....Do you know where your Tin Foil Hat is?

.

I've got it on the other end of me. It'll help make for easy clean up.

[SHELLY]

Interview with Asian anaylst recommending "Go to Cash!...any color but Green."


.

[SHELLY]

Costco- I saw this the other night when browsing for unrelated items:


Basic preparation will impact the probability of your family’s survival in an emergency. Delicious and Easy to Prepare. Each bucket contains 275 servings of Pre-mixed and Pre-seasoned 100 % Vegetarian and Vitamin Fortified food for you and your family. With a 20 year long shelf life, this kit is perfect for the preparation of natural disasters such as hurricane, tornado, earthquakes or even a camping/hunting trip.

• Easy to prepare
• 275 servings
• Sealed in convenient Weather-Proof Bucket for Easy Transport
• 30 Servings - Potato Bakon
• 25 Servings - Corn Chowder
• 25 Servings - Ala King
• 25 Servings - Cacciatore
• 25 Servings - Western Stew
• 45 Servings - Whey Milk
• 25 Servings - Blueberry Pancakes
• 25 Servings - Barley Vegetable
• Total Weight: 23 lbs.0

Did they suggest wine pairings with this as well?


.

[rapunzel]

I just finished watching Sophia Coppola's Marie Antoinette, which seems oddly appropriate. Now I've switched to CNBC out of curiosity. This guy has terror in his eyes.

[SHELLY]

I just finished watching Sophia Coppola's Marie Antoinette, which seems oddly appropriate. Now I've switched to CNBC out of curiosity. This guy has terror in his eyes.

So you can see how the rest of the world is calling BS(!) to the CPI numbers last week that 'confirmed' that inflation was not a problem and the US economy is doing just swell

When you look up "Clueless" in any dictionary around the world, you'll see the following picture:






.

[cardogpal]

These are the sentiments that occur at a bottom. If the mkt is down more than 600 Dow points tomorrow on heavy volume ( more than 4 billion shares ) that could mark the selling climax. Companies like AT&T General Electric Proctor and Gamble Johnson and Johnson Exxon and Pepsi etc are insulated from the credit mess. On Monday I would be bidding for those stocks at 5%-10% below the price they closed on Friday.


Good points. The entire economy of the Unite States is not collapsing.

[flyforfun]

Old chinese curse "May you live in interesting times". In my calmer moments I wonder what I really have to be scared of. I have my health. To paraphrase Thoreau (I believe it was he) Security doesn't come from having things, it comes from knowing you can do without them.

Amen.....Well stated!

[elgordoboy]

• 30 Servings - Potato Bakon recommended wine pairing: Alta Vista, torrontes, salta, argentina, 2006
• 25 Servings - Corn Chowder recommended wine pairing: Licia, albarino, rias baixas, spain, 2005
• 25 Servings - Ala King recommended wine pairing: Adriano, white meritage, douro valley, portugal, 2005
• 25 Servings - Cacciatore recommended wine pairing: Prius de Morana, verdejo, rueda, spain, 2005
• 25 Servings - Western Stew recommended wine pairing: Protocolo, tempranillo, laguardia, spain, 2005
• 45 Servings - Whey Milk recommended wine pairing: Raimat, cabernet sauvignon, costers del serge, spain, 2001
• 25 Servings - Blueberry Pancakes recommended wine pairing: Croft, port, portugal, LBV 2001
• 25 Servings - Barley Vegetable recommended wine pairing: Thunderbird
  
  I would like some domestic alternatives as I am sure anything european is now quite out of my reach. I can get the Thunderbird easy enough.

Did they suggest wine pairings with this as well?


.

[Capricious]

Might be time to sell everything into a "sucker rally" (if there is one) ...?

That was last week- remember the 400 point rise?

[Capricious]

"... If the mkt is down more than 600 Dow points tomorrow on heavy volume ( more than 4 billion shares ) that could mark the selling climax..."



Maybe


"... Companies like AT&T General Electric Proctor and Gamble Johnson and Johnson Exxon and Pepsi etc are insulated from the credit mess...."




But their customers may not be.




"... On Monday I would be bidding for those stocks at 5%-10% below the price they closed on Friday...."


Only under rare circustances will I be buying individual stocks; not
enough money to play that game (and one must have a LOT of money
or a lot of luck or a very long time-window to play that game.)

At some point a "buying opportunity" will present itself. For me, I am
not convinced that time is upon us.

At that time, index funds will most likely be my choice.





"..Good points. The entire economy of the Unite States is not collapsing..."



Yet to be proven. The economy is highly dependent upon the "consumer,"
and the consumer can no longer borrow against (nonexistant) home equity,
can no longer borrow against shrinking limits on credit cards, is currently
increasing borrowings against 401K's (i.e. borrowing from the future to finance
the present & past).

As for spending "savings," well.....what savings?


I think we have a ways to go, yet.

[sandybanks]

http://www.stuff.co.nz/4442389a6026.html

http://www.efoodsdirect.com/

[Capricious]

Is Lehman "the other shoe?"


http://dailybriefing.blogs.fortune.c...faces-a-storm/

"Shares of the brokerage firm slid 15% in early trading after the firm said it’s got enough cash to keep doing business. The firm made the statement after a big Asian bank asked traders not to do new transactions with Lehman, The Wall Street Journal reports. That decision raises the possibility that Lehman will face a run like the one that brought down Bear Stearns (BSC) this weekend...."





And cheery news from Alan

http://money.cnn.com/2008/03/17/news...ion=2008031707

"NEW YORK (CNNMoney.com) -- Today's economic condition could likely be seen as "the most wrenching since the end of the second world war," wrote former Federal Reserve chairman Alan Greenspan in the Financial Times on Monday...."

[seaside2]

This thing will get a LOT worse before it gets any better. This business of being highly leveraged in all aspects of the economy (housing, investment bankers, etc) is extremely deeply rooted and it WILL take a long time to resolve itself.

Some people and businesses will go broke (and that is not all bad, believe it or not).

[YoungFT]

Can any bank see a 40%+ drop in stock price in a single day and survive? Nat City is about to go under.

Insolvency of Regional Banks is another step in the process.

I'll have another Guiness please!

[rapunzel]

Of course, Greenspan goes on to claim the current situation could not have been predicted, and that a return to his policies is the only thing that can save us now.

In the article cited above, Greenspan writes, "Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief."

Shocked disbelief? Seriously? I know NOTHING about markets beyond what I absorbed of economics from studying history and it seemed clear to me when he was praising the "resourcefulness" of the markets with the creation of ARMs that he was fueling the irrational exuberance. It sounded like 1928 -- buy stocks on margin, they never go down by very much or for very long! There's virtually no risk!

Now, he's telling us with a straight face that the government should always be ready to step in to mitigate losses in a bust, but never intervene with regulation to limit the size of the bubbles and windfall profits in the booms. I read that as the very wealthy should be encouraged to take huge risks and accumulate vast amounts of wealth, but should not be allowed to be completely wiped out when they exercise poor judgment because they are the economy. So, if some poor schmuck lives in a house in New Orleans without flood insurance (which wasn't required because the levees were backed by the full faith and credit of the U.S. government) and loses everything, that's the roll of the dice, that's the way market's work. But if a Wall Street firm rolls the dice and comes up empty, it is incumbent upon the taxpayers to bail them out?

I brings to mind another phrase from history -- Privatize the profits, socialize the losses.

Am I oversimplifying? Is there something I'm missing?