Bear Stearns Gets Emergency Funding From NY Fed, JP Morgan

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 |  Includes: BSC, JPM
by: Barry Ritholtz

LIVE BLOGGING BEAR STEARNS: (in reverse chronological order)

10:55: [Editor: End of live blog - read more on Barry's blog]

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10:46: Jim Rogers' comments to short all investment banks looks pretty spot on.

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10:44: So much for the recovery -- Dow off 200

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10:42: For you numerologists: Bear at $28, down $28 -- a two one for one split

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10:40: Groundhog Day: All we've done is guarantee 6 more months of this exact same thing. I hope I am alive when the post-mortem is written on this 50 years hence. I suspect it will be rather critical.

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10:38: When I whine about Socialism, this is EXACTLY what I am referring to. Instead of letting Bears Stearns get crushed, and then see the assets and talent pool get scooped up by someone else, we keep a wounded Bear on life support hanging around . . . My preference is creative destruction.

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10:36: Welcome to Bailout City!

Now you know: BSC is considered to big to fail.

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10:33: If you are wondering WTF a non-recourse, back-to-back financing is, pull up a chair:

JPM gets to go the the Discount Window and borrow all the greenbacks they want; Then they loan that to Bear. In the event that Bear defaults, the NY Fed cannot go back to recover from JPM -- hence, non-recourse.

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10:31: Here's the JPM press release:

JPMorgan Chase and Federal Reserve Bank of New York To Provide Financing To Bear Stearns
http://biz.yahoo.com/bw/080314/20080314005430.html?.v=1

JPMorgan Chase & Co. (NYSE: JPM - News) announced that, in conjunction with the Federal Reserve Bank of New York, it has agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days. Through its Discount Window, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase. Accordingly, JPMorgan Chase does not believe this transaction exposes its shareholders to any material risk. JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company.

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10:29: Here's the link to the 9:21 press release from Bear:

Bear Stearns Agrees to Secured Loan Facility with JPMorgan Chase
http://biz.yahoo.com/bw/080314/20080314005441.html?.v=1

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Bear Stearns Press Release:

"We have tried to confront and dispel these rumors and parse fact from fiction," CEO Alan Schwartz said in a release. "Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."

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10:25: Dow off 100 -- things seem to be stabilizing -- what a wild ride

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10:20 Dow recovers . . . off 126

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10:15: No NY Fed statement released as of 10:15 yet . . .
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Seemed to have stabilized at $35-36 -- At 45 minutes into trading, they have traded over 52 million shares

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No Federal Reserve Press Release on this? I better check the NY Fed site . . .

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Turns out Richard Bove was right -- the Fed action on Tuesday ABSOLUTELY WAS to rescue Bear Stearns . . .
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Bear = $34 -- $7 bucks off the 26.85 low

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Thought: Bear denied on CNBC they had any liquidity concern. LIARS

Once again, we learn you cannot trust management to tell the truth.

Financial institutions have been issuing denials about the credit crunch for for over 12 months now --a ll of them full of shit. Amazing freefall

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Dow off 300 points, Nasdaq off 58

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BSC = $30 Down $28 off 45%

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Bear down $26 -- off 40%

Dow off 200

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Down $18

Market is down 160 -- Goldman, others under pressure

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Down $20

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Down $19 -- its gonna be halted soon -- $38.50

As we discussed last night, liquidity concerns about Bear Stearns (NYSE:BSC) have been validated.

The NY Federal Reserve Bank, and JP Morgan (NYSE:JPM) have agreed to provide secured funding to Bear and an initial period of up to 28 days. JPM is working with Bear to secure permanent financing or other alternatives for them.

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Bear is now $47 and falling fast.

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Doug Kass asks a good question: "If Bear Stearns (BSC) requires a temporary bailout, did the company's management fib in its recent CNBC interview?"

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Quick Headline roundup:

Bear Stearns to Get Backing From J.P. Morgan, N.Y. Fed (WSJ)

Bear Stearns to Get Backing from J.P. Morgan, N.Y. Fed (Bloomberg)

Bear admits its liquidity 'significantly deteriorated' (MarketWatch)