Lawrence York

Current Financial Crisis Going Into Extra Innings

The Fed as amply dealt with the liquidy issues of the market but not the solvency issues. Leverage of course amplifies both. The reason this crisis will have many more innings is that enormous value has been lost and the Fed is betting that time will cure the problem as banks, assisted with bigger spreads, will be able to gradually write-down/off bad loans and muddle through. The only problem with that scenario is that banks play by one set of rules and brokerages another and they are interconnected in the financial system. Moreover, the US economy is teetering and more likely to be his enemy rather than his friend in the timing bet. Remember we still have GNMA losses to tabulate and that last broken leg of the stool may very well be the undoing but nobody will discuss it publically.

The Worst Trade Of All Time

I think we will see a shareholder lawsuit against the Fed and JPM. This is likely going to go the the Supreme Court. Bear will argue that had the Fed opened the window a day earlier they could have survived and that the different banking vs brokerage regs created an unfair advantage such that this takeover was unprecedented and unfair.