$$$ Deals: The Fords in India’s Future
In our M&A Roundup for the week ended March 30, there’s still a pulse if one looks at certain markets — not just Indian firm Tata Motors buying Jaguar and Land Rover, but also in a credit-card deal and a blank-check acquisition. [CFO.com]

$$$ DON’T FORGET: For the Love of White Horse and Tiger, tonight, 9 PM! [CNBC]

$$$ CLARCOR Inc. (CLC) [WallStrip]

This May, the University of Texas Press will publish a book by Robert Auerbach, called “Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank.” In it, Auerbach questions the legitimacy of Greenspan’s Ph.D. thesis from NYU, implying that the paper was “obtained in a few months with little more rigor than a matchbook-cover art degree,” and that were you or I ever privy to reading the thing, it would be plainly evident that Greenspan was blowing the half the degree-granting faculty. Luckily for Greenspan, that’ll probably never happen, because, according to Auerbach, New York University is in cahoots with the former fed chairman to keep Auerbach/other interested parties from every laying eyes on that puppy (Auerbach says NYU’s provost, David McLaughlin, claims that dissertations from the 1970s were not placed in the library, and therefore unavailable, which Auerbach doesn’t buy FOR A SECOND).

Obviously this whole thing is making Bernanke tweak his nipples in delight, and our sources in Washington tell us he’s taken to walking around town with his paper tucked under his arm, replying with feigned innocence when people ask what it is, “Oh just the musty old thesis. Needed to check something; still holds up pretty well. See: Benjy Bernanke, MIT Class of 79.” We’ll do an extended review of the book when it officially comes out, but from the unedited copy we were able to get our hands on today, here’s the other shit Greenspan doesn’t want you to know about that you can likely expect to read, barring any major rewrites.

Auerbach alleges that :

1. Greenspan hasn’t read any of Ayn Rand’s books.

2. All of his addresses to Congress involved typing a speech at a third-grade level then using Microsoft’s thesaurus to replace every single word with the most fancy-sounding substitute — even if he didn’t know what it meant.

3. It is a lie of the highest order that Greenspan conducts 80% of his business out of the tub; the author claims “evidentiary proof” that “all the magic happens on the can.”

4. His basement wall is littered with photos of, articles by and home addresses of “infidels I must exterminate,” including Robert Auerbach, Jim Grant, Bill Fleckenstein, and Alan Abelson.

5. BG has 20/20 vision and wears the glasses to “look smart.”

6. He never dated Barbara Walters. Actually briefly dated Geraldo Rivera (then Jerry Rivers) during his late-70s “experimental phase,” and Phyllis Diller for the better half of the 1980s.

7. He lies about his age. He is really only 42.

8. Greenspan inflated his resume credentials; actually spent most of the 1960s and early 1970s running “Easy Al’s Used Cars” in Dubuque, Iowa.

9. During undergrad his source of income was from peddling phony tips on penny stocks, then cleaning up shorting them, and working as a phone sex operator. The book goes into graphic detail, noting that Greenspan was known for his unique style, telling callers things like, “At this juncture you should feel your labia minora becoming engorged. (Since retiring, Greenspan has apparently fired the phone line back up, to much success. $3.99/minute, call 203-890-2000)

Dr. Greenspan’s Amazing Invisible Thesis [Barron’s]

Susan Krakower sits, stands, perches, then paces the length of her windowless office. A crease deepens down the center of her forehead. In two hours “Fast Money” airs, and something’s not right. The show she created isn’t moving fast enough in its second segment, and that’s a problem. “I want the trades - get right to it!” she explains. Tonight she’s trying something new. It’s a quick interlude she dreamed up the previous morning after watching her 7-year-old son’s favorite TV programs, Nickelodeon’s “iCarly” and “Drake and Josh,” which rely on graphics to move the narrative. When the show airs, she’ll head downstairs to the control room to swap a new, 15-second sound and visual effect in place of a riff by host Dylan Ratigan.

CNBC feels your pain… [Fortune]

Treasury Secretary Hank Paulson’s “blueprint” for revamping the financial regulatory system is already coming under fire from powerful agency heads. As early as Friday, even before the details of the plan were widely-known, the plan was lambasted by John Reich, the director of the Office of Thrift Supervision, which oversees the savings and loan industry. Immediately after Paulson’s speech this morning, Commodity Futures Trading Commission big shot Bart Chilton released a colorful and blisteringly critical statement describing the plan as “moving boxes around in Washington DC.”

Paulson’s plan would combine the Securities and Exchange Commission, which regulates equities and debt markets, with the Commodity Futures Trading Commission, which that regulates the exchanges trading commodities and financial futures. The two commissions have very different regulatory approaches, with the SEC favoring direct regulation and a rules-based approach and the CFTC favoring a principles based approach that relies heavily on self-regulation by commodities and futures exchanges. SEC head Chris Cox has been described as being disposed to supporting the plan.

After the jump, we delve into the dirty, metaphor-strewn past of the CFTC commissioner.

I love every aspect of this quaint tale about Canadian hedge fund manager Matthew MacIsaac (MM Asset Management) facing cocaine charges (he was arrested at the end of a six-week investigation known as Project White Rabbit, at a club called the Comfort Zone; the damning bit of a evidence from a “rival” manager that MacIsaac is building a new house with his and her sinks in the master bath) but here’s what I love most: the fact that MacIsaac apparently attempted to “explain” the $600 in his pocket to the police officers on the raid by saying, “I’m a hedge fund manager.” A little bit because (and I could be wrong) I’m pretty sure it’s not illegal to have cash in your pocket, so it sounds like MM folded like a cheap suit even Thain* wouldn’t be caught dead wearing, and a lot a bit because in my mind, it’s the new default excuse everyone can use, for any situation with even the hint of consequence. Just imagine yourself to be one of your favorite hedge fund managers, and respond as they would — as in the examples below.

Officer: Did you just litter, pal?
Leon Cooperman: Yes, but officer, I can explain: I’m a hedge fund manager.

Officer: Sir, this is a peaceful demonstration. We don’t allow people to immolate themselves to protest eating meat.
Dan Loeb: First off, fuck you and your animal-clogged arteries. And b., I answer to a higher authority—I’m a hedge fund manager. [Douses himself in lamp oil and lights a match.]

Angry Shareholders: Did you just lose our company $100 billion in shareholder capital?
Jim Cayne: It’s OK, I’m Big Daddy Cayn—I mean, I’m a hedge fund manager.

Barnes and Nobles employee: Did you just take that book in the bathroom with you?
Larry Robbins: Yeah, and I was in there for a while, too but don’t worry about it: I’m a hedge fund manager.

Guard: There’s no smoking in the museum, pal.
Jim Simons: Oh, it’s all right, buddy. I’m a hedge fund manager.

David Spade: Melted chocolate inside the dash, that really ups the resale value.
Steve Cohen: I think you’re going to be okay here because I deep fried the chocolate then coated it with caramelized sugar, thereby creating a hard candy shell. Plus, I’m a hedge fund manager.

Hedge fund manager faces cocaine charge [Globe And Mail]

*He looks like a cheap Midwesterner.

We’re going to have a lot to say about the costs of Treasury Secretary Hank Paulson’s Blueprint for a Modernized Financial Regulatory Structure. Before that, however, it’s worth noting that there is little to admire about our current financial regulatory structure. Largely a product of the financial crises of the past, the structure was unwieldy, arguably created a bureaucratic structure at odds with the constitutional framework of our Republic and tended to serve the interest of the very financial institutions it sought to regulate at the expense of individual investors and the broader public. The array of regulatory bodies we live with were largely “captured” by the securities and banking industry, although “capture” is probably the wrong term because it implies that they were independent at some point. Many were built to serve the interests of Wall Street, so no capture was necessary.

The best that can be said about the current system is that we have years of experience with it. We understand how it operates, how it fails and what its strengths are. This is a conservative point but one that needs to be made: regulatory innovation inevitably leads to “unintended consequences” and unanticipated costs. At the very minimum, the costs of adjusting to a new regulatory structure need to be taken into account. We may not be risking our lives and sacred honor by declaring the need to dissolve the longstanding financial regulatory bonds, but we may be risking our fortunes.

That said, we’re headed deep into the details of this bold new world Paulson has proposed. The Treasury has released a cheat sheet here. But if you are really ambitious, follow us into the 212 page blueprint. We welcome your insight, of course, in the comments below or via email to tips@dealbreaker.com.

Female bankers in London are taking pole-dancing exercise classes. This would be “scandalous” if suburban housewives across the country, who’ve been taking these classes as well as “cardio strip tease” et al. at their local gyms for at least the past five years, hadn’t beaten them to the punch. At this point, everyone knows how to swing ‘round one of these things and it’s no longer going to give you a leg up at work. Now, what would be interesting, and probably a more marketable skill? If some of these ladies (and/or gentlemen) would have the brass to attend the pole-smoking classes from the same instructor later that evening. Who knows? These services could come in handy at some I-banks unable to meet margin calls.

Pole-Dancing Classes Lure Eager Women Bankers in City of London [Bloomberg]

There’s an outrageous article in Crain’s today about executive perks. Apparently senior management at some banks get to fly on the corporate jet. Others have their country club tabs picked up by the company. A few—VERNON JORDAN, LAZARD LTD, SHAME HIM IN THE STREETS—even get their apartments paid for, at up to $24,000 a month. Crazy, isn’t it? No, it’s not crazy. What’s crazy is that everyone—author, shareholder activists, Tim Robbins and Susan Sarandon— still fails to get it. If I agree to run one of these things, I want to plied with gifts at every turn. This job is really hard and I’m very sensitive and the suggestion that I’m not worth tons of freebies plays on the deep insecurity I attempt to mask with a self-righteous attitude and shameless bravado. That makes me unhappy and you know what happens when I’m not happy—I destroy billions in shareholder capital (I might do that anyway, but without the gifts the threat is more imminent).

Plus, the notion that shouldering my basic costs of living is a “gift” is absolutely absurd. That’s a basic requirement of your job in keeping me comfortable enough to work. I never, EVER, would’ve taken this gig if I thought I would be asked to pay for wherever I happen to rest my head. It’s extremely demeaning. Know what I would consider a “gift” and something I’d even think about standing before shareholders and fighting for? Free access to the Olsen twins, which I hear Goldman has no problem subsidizing for LB, though, as this video shows, he made be getting duped.

A key question in the liability of brokerages in the failure of the auctions for auction rate securities is what customers were told about the risks of the products they bought. The brokerages now claim they properly warned customers about the products, and that they never considered them cash or cash equivalent. Most individual brokers we’ve spoken to off the record say that this is very inaccurate, and every retail customer we’ve spoken to (including some who are friends and family of DealBreaker editors) say they bought these securities with the understanding that they were “highly liquid” or “cash equivalents.”

So what did the brokerages tell retail customers? There were lots of disclosure documents that say a variety of confusing things but almost none of them reveal the risk of systemic and perhaps permanent auction failures for the auction rate preferred securities that pay low interest rates even after auction failure. And, as the screen shot of a ARPS customer online account above reveals, the brokerages did, in fact, take actions that encouraged customers to regard the ARPS as cash. This account comes from a Merrill Lynch customer account. (Click on image for a bigger version.)

It’s often been said that we’re in the worst financial crisis since the 1930s. So perhaps its no surprise that we seem on the verge of the biggest financial regulatory overhaul since the Great Depression. But we certainly didn’t expect anything this sweeping to come out of the Bush administration. We clearly underestimated these guys. Talk about shock and awe.

But we’re getting ahead of ourselves. Over the weekend Treasury Secretary Hank Paulson released the outline of his controversial and sweeping a plan to overhaul financial regulation. He would eliminate thed SEC, FDIC, CFTC, OTS and OCC. And after dumping out this bowl of alphabet soup, he would fill it right back up again with the Prudential Financial Regulatory Agency , the Conduct of Business Regulatory Agency, the Federal Insurance Guarantee Corporation and the Corporate Finance Regulator. It’s going to take some time to digest these changes.

Later this morning, Paulson will give a speech about this plan. In the meantime, the plan is already coming under criticism. Barney Frank worries that the plan may take too much power away from states, particularly (from what we’ve been lead to understand) in the area of regulating insurance. Larry Ribstein worries that the new, more concentrated structure of regulation could result in losing significant flexibility in financial innovation.

“On this latter point, consider that the CFTC’s replacement, CBRA is likely to be less accommodating,” Ribstein writes. He adds that “with one regulatory agency we’re likely to get fewer new financial products.”

We’re going to hold back for now, as we attempt to work through what’s known about the plan. Let’s see what Paulson has to say. More later today.

Paulson Plan Begins Battle Over How To Police Market
Paulson’s big bang [Ideoblog]

Lehman Sues Japan Firm, Claiming $350 Million Fraud (WSJ)
There’s a million ways to lose money. Here’s one of the more interesting ones we’ve been paying attention to. Lehman claims that employees of a Japanese firm fraudulently bilked Lehman out of $350 million. Their method of action: using official company documentation to suggest that it was behind a hospital refurbishment funding project. Turns out the Japanese company Marubeni Corp had no idea about it. So now Lehman is suing for its cash back. Whether they get it back or not, you have to figure that Lehman’s counterparty (so to speak) in this fraud, must’ve had a damn good idea about how this whole process works to pull something like this off.

Citizen Huff (NYT)
The redhot Huffington Post continues to make the media rounds, jumping form the New Yorker to the New York Times for its latest glowing profile. Actually, it started even earlier when some (possibly dubious) numbers came out that the site was bigger than Drudge. It helps that it’s election season and there’s an added hook to write about a politically-oriented site. But really. Financially, the site expects revenues between $6-$10 million this year, on what sounds like breakeven profits. Oh, and they found some guy to say it was worth $200 million.

Aloha Airlines Halting Passenger Service (AP)
We’ve long been in the “more bankruptcies” camp when it comes to airlines, hoping that they’ll lead to more gates/opportunities for interesting upstarts. That being said, seeing as we’re not too big on the intra-Hawaii island-hopping scene, it’s hard to get real excited about the end of Aloha Airlines. After 60 years, the company recently declared bankruptcy, and now it’s shutting down operations for good.

HUD Secretary Expected to Quit (WSJ)
There’s something about HUD secretaries. Always seemingly getting up to no good. Yesterday we couldn’t have named our current one, but today we know his name is Alphonso Jackson and he’s expected to quit amidst some vague allegations of wrongdoing. The Journal describes this as a blow to Bush’s attempt to fix the housing mess. Eh, somehow we doubt that this position isn’t so crucial to the situation.

UBS Falls After Reports It May Have to Raise Capital (Bloomberg)
Having already raised about $13 billion earlier this year, UBS may have to double dip in the guacamole. As it gets set to report another wave of writedowns, analysts say it will have to go back and raise more money, possibly as much as another $15 billion. Overnight, shares fell around 4 percent on the report.

$$$ Jewish Lessons for Bear Stearns [Mixed Multitudes]

$$$ Obituaries: CYGT aka The Stock That Killed My Hedge Fund [TS]

$$$ When Will It Be Safe To Be Long Asian Dudes? [LoSC]

$$$ (WMT) [WallStrip]

Regulatory Rethink
By CHARLES SCHUMER (With
March 28, 2008; Page A13

The sudden collapse of Bear Stearns was a shock to our financial systemmeans I can now bash the Bush administration and all it stands for without even using the word “Bush” anymore. This is a huge plus since it makes all the guys in the Senate lounge giggle. and It was also a wake-up call to anyone who believed our financial house was in good order. Last week we Democrats looked into beheld the glory of a financial abyss, glowing political opportunity and the Federal Reserve acted too swiftly and appropriately to prevent permit a potentially much broader failure of the financial system and a legislative mandate the likes of which Democrats haven’t even had so much as a whiff of Since the New Deal. Unfortunately, The Fed’s actions appear, at least for the moment, to have provided some much needed breathing room to the markets.

But we are by no means out of the woods race when it comes to the long-term prospects for a complete, legislative assimilation of the health of ourfinancial system, or of our economy more broadly. We need to rethink the regulatory framework that governs our financial system.

Nobody leaves ‘til we get there!

Our stylish friends at Guest of A Guest have discovered the latest fashion trend sweeping the sophisticated nooks of New York City. The discovery came at an art opening in Soho.

While we saw the usual sartorial pieces of cocktail dresses, hats and bow ties, it was this dapper little vest from the Bear Stearn’s spring ‘08 line that was the true hit. We suggest snatching up these puppies now, as the designer has taken a permanent retirement. Their worth will be sure to appreciate in value in fiscal years to come.

Texas lawyer Joe Jamail is the lead lawyer for Clear Channel, which has sued the banks that are trying to back out of financing the acquisition of Clear Channel by a pair of private equity firms. Clear Channel claims the banks hesitation amounts to tortious interference with the acquisition agreement. Although there’s little—or perhaps no—precedent for this kind of case, the banks being sued have reason to be afraid.

You see, Jamail famously won a $10 billion verdict for Pennzoil in a tortious interference suit in against Texaco. Pennzoil had agreed buy Getty Oil in 1984, but Texaco swept in and bought Getty before the deal had closed. The massive award forced Texaco into bankruptcy. At the time it was the largest judgment in American history.

Pennzoil wound up collecting only $3 billion after Carl C. Icahn, who was Texaco’s largest shareholder, helped negotiate a settlement with Jamail. Before the settlement, the two sides spent years battling each other. “The fight has been punctuated by thousands of hours of fruitless negotiations, legal wranglings, dashed hopes and charges by executives of both companies accusing the other side of greed, arrogance and duplicity,” the New York Times said in 1987.

So how did Icahn resolve things with Jamail? After the jump, Icahn reveals all in a standup performance at Carolines Comedy Club in 2003.

Surprising: shares of BSC are down nearly five percent since Rabbi Cayne sold his stock. Not surprising: A would-be incoming analyst in Bear Stearns’ equities department writes to tell us he’s been informed the services of he and his brethren are no longer required (and to inquire about openings at DealBreaker. Just one: Hahn’s job). Cheer up BSC shareholders/BSC employee who never was— you didn’t have a worse week than this guy:

The usual midtown haunts of Bear Stearns “worker bees” are a little haunted these days. It’s easier to get a pint of Guinness during happy hour at Maggie’s Place, but Fiona and Nick seem a little lonelier. It seems the collapse of Bear has depressed not only Jimmy Cayne’s net worth but the libational spirits of his underlings as well.

Spencer Morgan of the New York Observer infiltrated Connolly’s, the forty-seventh street Irish bar that plays home to Black 47 on Saturday nights and once hosted a lot of Bear Stearns regulars.

“On an average night there would be between 20 and 30 Bear guys,” said a 23-year-old Bear man we’ll call Tommy. He works on the investment banking side and has been a Connolly’s regular since he started at Bear a year ago. He said that on Friday, March 14, when it was pretty clear that the bank was heading south, and fast, more than 100 Bear employees, mostly men, gathered among the mahogany, rich leather and lighted green clover leaves of the bar.

“Bear! Bear! Bear!” they chanted as they downed their shots, recalled the young man. “Everyone was trying to keep hope alive.”

“They’re coming less, these last weeks,” said the compact bartender in an Irish brogue Monday night, when the Bear stock was being valued at between $4 and $10, depending on the appetite of JPMorgan. The figure was being displayed on several flat screens tuned in to CNBC’s Kudlow & Company. “I think a lot of them are nervous now. It’s a sad thing; a lot of them are older guys with retirement plans, and now this, you know?”

Bear Naked Gentlemen [Observer]

March 28—

845 AD : (Ragnar Lodbrok: Extortion, Interstate Flight) Ragnar Lodbrok is paid 7,000 pounds of silver by Charles the Bald to leave Paris and take his pesky Viking hoard with him.

1834 AD : (Andrew Jackson: Bank Fraud, Embezzlement, Money Laundering, Counterfeiting) The Senate censures Andrew Jackson for defunding the Second Bank of the United States. A year before, being outwardly hostile to the concept of a national bank, he had diverted the capital to local and state banks. Injecting, one might say, a little liquidity into the system. State banks were in the annoying habit of printing their own currency in 1833, itself a bit of a issue, but combined with the lack of a hard-currency reserve (gold or silver), which most banks did not hold in quantity, the resulting inflation was ruinous. Jackson tried to stem the tide by requiring government land purchases to be paid for in hard currency (again, gold or silver) but this only served to boost the demand for the coins from state banks, which, unable to satisfy the demand owing to their low or non-existent reserves, then collapsed. The result was the Panic of 1837 and the years of economic ruin that followed. Jackson expunged the censure once his allies took the Senate again a short time later.

Ironic, no?

2002 AD : (Multiple Defendants: Securities Fraud, Tax Fraud, Bank Fraud) Enron is given 90 days to turn over documents to Federal Investigators. Most don’t turn up.

A blast from the past. So to speak. With echos in the present:

Citigroup said Wednesday that it would pay $1.66 billion to the Enron Bankruptcy Estate, which represents creditors of Enron, the energy trader that engineered one of the biggest U.S. corporate frauds. With a trial scheduled for next month, Citigroup was the last of 11 financial institutions to resolve claims going back to 2003.

Citigroup settles with Enron creditors. [International Herald Tribune]

Equity Q. Private is the author of Going Private and a Guest Editor at DealBreaker.com

The unbiased, neutrally independent American Coalition for Ethanol (it is worth a visit just to absorb- or be absorbed by- the simply eerie animations on the website, but don’t forget to check out the “all about ethanol” stuff too. Ethanol 101 is an invaluable source of the latest bullshit, biofuel jargon guaranteed to get the undergarments off of that hottie with the clipboard that you have been oggling since crashing the Democratic fundraiser) released a report earlier this week revealing that Ethanol might save consumers money.

Of course, we only bring it up as a way of talking about the far more interesting publications of Robert “Ethanol Is The Largest Scam In Our Nation’s History” Bryce. Seriously, you can’t fail to appreciate titles like “Gusher of Lies,” especially when they are accompanied by subtitles like “The Dangerous Delusions of Energy Independence.” Or perhaps, “Pipe Dreams,” paired with “Greed, Ego, and the Death of Enron.”

Either way, I think I’ll buy corn futures.

Lobby Says Ethanol Helping Reduce Gasoline Costs [Research Recap]

Equity Q. Private is the author of Going Private and a Guest Editor at DealBreaker.com

From: employeediscountnews@citi.com

To: employeediscountnews@citi.com

Sent: Friday, March 28, 2008 10:29 AM

Subject: Employee Discount News: Citi Employee Mortgage Program

As a U.S. employee, you may be eligible for Citi and other partner products and services at special employee rates. Employee Discount News is a monthly email with information about products or services that may interest you.

This month’s feature - Citi Employee Mortgage Program

As a U.S. Citi employee, you receive the best CitiMortgage retail rate plus your choice of .125% off the interest rate or $1,000 credit toward closing costs.

We’ll help you through the process, whether you’re a first-time homebuyer, purchasing a second home, refinancing, or building your dream home.

If the adjustable-rate mortgage on your property is about to reset, your monthly payment could start to rise. This may be an excellent time to contact the Citi Employee Mortgage Program team for an evaluation of
your current financial situation and select the best mortgage product for your future.

Benefits include:

- Exclusive sales team
- Complete confidentiality
- $1,500 on-time closing guarantee (1)

Ancient joke: What’s the difference between god and Larry Ellison?
Ancient answer: God doesn’t think he’s Larry Ellison.

The list of people who take more flak than Larry Ellison for being rich is pretty short. But, then, Larry Ellison works very hard at maintaining and inspiring hatred. His efforts are so ceaseless, one might almost think he revels in the vitriol. Actually, we like to think that his divine metabolism absorbs energy, not only from the seething hatred of the mere mortals he enslavesemploys, but all of humankind.

It would be easy to chalk his abrasiveness to childhood trauma (born to a 19 year old, unwed Jewish mother, sent away to live with his aunt and uncle, etc. etc.) but it is so pervasive, it is just much cattier to attribute it to a sort of perverse pleasure.

There was that thing with the aircraft noise. After being cited repeatedly by the city of San Jose for noise violations stemming from his insistence that he could take off and land his Gulfstream whenever he damn well pleased, he simply sued the city for an exemption (a suit which, after record legal fees, he won).

And that time when he offered to “donate, as in free” the software to create the largest Big Brother database in the world along with a national ID program. (He didn’t mention that Oracle planned to charge significant “maintenance fees”).

And when accused of insider trading after dumping $1 billion in Oracle stock? He donated $100 million to charity in lieu of paying a fine. (The little detail that it was to his own charitable foundation seems to have attracted little notice until after the settlement was final). We’ll let you guess if he claimed a deduction.

Oh, he pledged $115 million to Harvard- but decided he didn’t want to pay- and so he didn’t.

And now, he is stealing from school children. The cad!

The Oracle chairman, who is the fourteenth richest person in the world, recently had the value of his 23-acre Woodside, Calif., home reassessed from $173 million to about $70 million. That dropped his annual tax bill by more than a million dollars. The biggest loser: Local schools that depend on tax revenue for the lion’s share of their budgets, according to the Almanac.

The Portola Valley School District, for one, will lose an estimated $250,000 to $300,000 a year as a direct result of the Ellison reassessment, Tim Hanretty, the district’s assistant superintendent, tells the Business Technology Blog. That’s a healthy chunk of the district’s $11 million annual budget, and Hanretty tells us the district will have to lay off about six of its 100 or so employees to make ends meet. The cuts won’t come in the classroom, but in administrative and facilities positions.

Count on Larry Ellison to make subprime work for him, at the expense of helpless school children.

Ok, so the headline is a bit of a stretch. But he’s been asking for it for years! (Even his Wall Street Journal “hedcut” is unflattering).

Yes yes, what a jackass. (Admit it, you want to be Larry Ellison).

Larry Ellison’s Tax Cut Breaks School’s Budget [WSJ]

Equity Q. Private is the author of Going Private and a Guest Editor at DealBreaker.com

…with his newfound faith in Judaism, and stoner ways, is Jimmy Cayne not:

In the past weeks, together with his wife, Patricia Cayne, who is a student of Jewish religious traditions, Mr. Cayne has spent considerable time searching for comparable events in religious history to see what lessons can be learned from the collapse of his firm, said a person who has spoken to him recently.

Shocked into an inconsolable state, Presidential Candidate Hillary Clinton feared out loud yesterday that injecting liquidity into the economy might reduce the United States to the economic level of post 1990s Japan.

We might be drifting into a Japanese-like situation. I don’t think we can work our way out of the problems we’re in in the broad-based economy with monetary policy alone. I think the Japanese tried that and tried and tried that.

Liquidity isn’t the answer, you see. Instead, we have to use liquidity.

Details after the jump.

Judge says ex-Bear exec can’t join Morgan Stanley (Reuters)
A judge has ruled that an ex-Bear exec can’t take up work at Morgan Stanley, because, argued Bear itself, the just-resigned executive hadn’t given the proper 90 days notice. The 20-year old vet just quit Bear 10 days ago, so the question seemed to be: in times of extreme chaos and uncertainty, do the normal rules about this apply? Apparently in this guy’s case, the answer was yes.

Citi Continues Leadership Overhaul (WSJ)
New hire at Citi: Terri Dial, who currently runs Lloyd’s retail banking unit in the UK, is expected to be brought on the consumer business under Vikram Pandit. More broadly, the company is expected to break down lines on a more regional basis, allowing its operations to be more in tune with the local culture and business climate.

Neeleman to leave JetBlue for Brazilian start-up? (Today in the Sky)
For some reason, this rumor is getting reignited, even though it’s old: jetBlue founder and erstwhile CEO David Neeleman may go to Brazil and start a new airline there. Presumably something like the jetBlue of Brazil. So far there’s nothing official, though apparently he is discussing his future as chairman of jetBlue — obviously if he jetted down to Brazil to launch a new airline, he probably wouldn’t have time to attend many board meetings. (Update: As a commenter points out, this story appears to be official) Anyway, we’re all for it. We’ve heard the civil aviation sector in Brazil could use some improvement…

Is China Really No. 1 in Internet Users? (The Numbers Guy)
Maybe not. Carl Bialik, as he’s prone to do, is able to poke a few holes in the side of the can, so that some light can get through. Some issues: the US survey only surveyed people with landline, which, given the demographics and all has to be skewing. Then there are people who have internet access, but who haven’t used it in the last month (though really, that can’t account for to many people). And then there’s the fact that stats out of China can only be relied on so much — sort of like stats for health and literacy out of Cuba. You’re going to believe those?

Weber Says ECB Will Raise Interest Rates `If Needed’ (Bloomberg)
Those stalwart inflation fighters at the ECB won’t be changing their tune any time soon. With most of the world still preoccupied about liquidity and cash availability and stuff like that, an ECB member is still warning that rate increases could be coming if inflation looks like it’s becoming an issue. Yeah, they really believe in this price stability thing.

$$$ How Does the Fed Have the Legal Authority to Bail out Bear? [The Conglomerate]

$$$ The real victims: wives, interior decorators, Martignettis [NYP]

$$$ Proxy Firm Backs John Mack, Mostly [DealBook]

$$$ Citigroup sued over auction rate securities [Reuters]

Davis’ lawyer said his client, who is said to have serviced former Governor Eliot Spitzer, is a former hedge-fund worker.

And There He Ho’s Again [NYP]

Jimmy Cayne is done with Bear. He filed his walking-papers with the Securities and Exchange Commission, the chairman and former chief executive of Bear revealed he had sold 5,612,922 shares at $10.84. Another 45,000 were sold by his wife. That position represents almost all of Cayne’s holdings in Bear, although he may still have options for more shares.

This should put an end to talk that a group of large shareholders might seek another buyer. Cayne was rumored to have talked with Joe Lewis, who owns over 9% of the company, about finding another bidder. But that was before JP Morgan Chase raised its price tag from $2 to $10 a share.

In another news, a reliable source tells us that Cayne was actually punched by another Bear executive in the company gym last week. We haven’t even tried to confirm that one.

Update: BSC sinking fast in after hours trading.

Cayne’s SEC Filing [SEC.gov]

Over at our sibling site Above the Law, editor David Lat wonders, “Is the difference between a banker and a lawyer access to orifices?” based on the assertion by dominatrix Mistress Victoria X that “finance guys usually want things in their asses,” whereas lawyers do not. This got me wondering:

Goldman Sachs has agreed with its clients’ assessment of Global Equity Opportunities, which is that the fund is, how to put this, a big fucking failure. The bank has taken back $1.8 billion of the $2 billion it used to bail the fund out last summer, which was GS’s effort to say to investors, “Hey, guys, this fund is good. To prove it to you, we’re going to stick our own coin in it as well and pray to god we don’t lose too much.”

But damn those smartass clients, they didn’t fall for it, and continued to ask for their money back. Which made Goldman think, “Hey, maybe they’re on to something?” and follow in suit. The other big name brought in to stick a guarantee on the box, Eli Broad, has pulled the $1 billion he put up as well. The fund is now down to $1.2 billion in net assets, from $5 billion at the start of August.

Goldman Reclaims Most Of $2bn Rescue Funds [FT]

This is the one we’ve been waiting for, people: on Monday, March 31, CNBC will air For The Love of Money: The Death of Seth Tobias, a one-hour documentary that will tell the “real” story of the Circle T founder’s death by drowning, with the added value of grainy reenactments, dramatic b-roll, voiceovers and talking heads. I’m so excited I don’t even care that the premise, “How far will people go for the love of money?” is way off base. (For the record, let’s get one thing straight: murder or accidental drowning, ST’s downfall had nothing to do with a love of money. CNBC should man up and give the show it’s proper name: “For the Love of Cock and Coke.” Help me out on this one, Charlie.)

From the preview, which we’ve watched many, many times this morning, here’s what we can expect: an absolutely WASTED Mark Haines offering his 2-cents on the guy, the widow’s 991 call, and shots of the pool where Tobias went down for the dirt nap (it’s not at all as I pictured it all those times I closed my eyes and reflected on that fateful night). From our wildest fantasies, here’s what we’re hoping for: footage of Andrew Ross Sorkin interviewing the management at Cupid’s, the gay club where Tobias’s stripper-boyfriend Tiger worked; a clip of Tiger dancing in a thong (plus the logical extensions: clip of Billy Ash dancing in a thong, clip of Seth Tobias dancing in a thong, clip of Mark Haines dancing in a thong); the recipe for the Ambien-laced pasta alla vodka Filomena Tobias supposedly used to drug her husband; and face time with personal assistant Billy Ash, AKA Mr. Madam the Ft. Lauderdale-based gay pimp (insofar that he is both gay and a pimp) who claims Tobias had a drug and alcohol addiction, and was murdered by his wife. Billy Ash. So. Much. Billy. Ash.

(As an aside: I don’t want to sound snarky about the tragic death of a hedge fund manager (although we could stand to lose a few more — market pruning and all), but the notion of CNBC trying to muster up the gravitas to do this story justice is a rich comic vein. Like the Mouseketeers performing I, Claudius. Anyway, can’t wait for Monday.)

Seth Tobias Preview [CNBC]
CNBC Presents “For the Love of Money: The Death of Seth Tobias” [CNBC]

The action in Lehman Brothers is more evidence about how unsteady markets are these days. Shares of Lehman Brothers fell nearly 10 percent early this morning. The rumor spread that the bank would make an announcement this morning, and many assumed (or encouraged others to assume) that it was going to announce more write-downs. This sparked rumors that Lehman Brothers could see a Bear Stearns-style run on the bank, with customers and counterparties bailing out. Options traders started snapping up puts, and shortly afterward the shares plunged.

“Much like the bets in the options market that predicted Bear’s demise (please refer to my prior posts that pointed these out before the institution’s near collapse), traders are betting that Lehman may be facing the same situation soon, in the next 22 days,” the Mock the Market blog explains. “Nearly every out of the money put has traded furiously today, with a particular emphasis on the ap 20’s, which have changed hands nearly 10,000 times today with several hours remaining in the trading day.”

Lehman spokeswoman called the rumors “totally unfounded” and even blamed short sellers for spreading rumors. The market seems to have bought this line, pushing the stock back from its lows. Some are skeptical, however, noting that Bear Stearns made similar noises even as it plunged toward bankruptcy. Companies love blaming shorts and claiming that they are pushing down stock with rumors, but there’s seldom any hard evidence of this. The media allows companies to get away with these claims without ever demanding that they substantiate the claim. Lehman’s no exception.

“There are a lot of rumors in the marketplace that are totally unfounded. We are suspicious that the rumors are being promulgated by short sellers of our stock that have an economic self interest,” Kerrie Cohen, a spokeswoman for Lehman Brothers, said.

We know that the rumors weren’t completely unfounded. Lehman did issue a press release today. Only it wasn’t about losses. Instead Lehman announced that Mark Bourgeois had been hired as the new co-head of global institutional distribution. (That’s an awesome banker name, by the way. Bourgeois.)

Don’t get too worked up about the temporary restraining order issued by a Texas court today against the bank syndicate that is balking at funding Bain and Thomas H. Lee’s buyout of Clear Channel. Sure, shares of Clear Channel jumped more than 10% on the news and they’re probably high-fiving themselves over this quick win. The order purports to require the banks to fund the acquisition but it won’t do any such thing.

If you aren’t familiar with the way courts issue TROs, you might not realize that the orders are often issued without the restrained party even getting a hearing before the court. Here the banks weren’t represented, according to media reports. One of the key terms here is “temporary.” The restraining order won’t actually force a funding, which would be far more permanent. What is likely to happen is that the banks will voluntarily waive the funding deadlines in the commitment letter, removing the urgency required to get a TRO.

The most succinct summary of the decision comes from our own Joe Weisenthal, who also writes for Paid Contenet. (Frankly, the time stamp on this item worries us. We thought posting Opening Bell at 7:30 every morning was rough. This went up at 4:23 am. When do you sleep Joe?. Update: As a commenter pointed out, the 4:23 am time stamp is PST, which means it went up at 7:23 am for people who don’t live three hours behind the rest of us. But that only deepens the mystery of Joe Dubs productivity, since Opening Bell was posted just one minute earlier this morning. Whatever Joe’s on in the mornings, we’ll take two please.)

Judge Awards Temporary Restraining Order Against Banks In Clear Channel Case [PaidContent]

Speaking of dominatrices, Meredith Whitney has been quite the busy bee: the analyst voted most likely to stick a heel up your ass spread the love-hate usually reserved for Citi yesterday afternoon to Merrill Lynch and UBS. Whitney estimated that the firms will report writedowns of $6 billion and $11.1 billion, respectively, this quarter. In the new note, published late Wednesday, Mistress W wrote that fourth quarter results will be a “rude awakening,” except to the management who’s known about the losses for a while but chose not to say anything.

Merrill, UBS Outlooks Slashed By Oppenheimer [Reuters via NYT]

Here’s some terrible news sure to send you into a downward spiral ending on cold tiles of the Bear Stearns’s fourteenth floor men’s room, pants around your ankles and shotgun in hand (which, for some people—non-senior BSC executives—would be considered a bad thing): Jeffrey Epstein accuser, Maximilian Cordero, has broken it off with boyfriend/lawyer/blogger William Unroch. Cordero, for those who might have unconscionably forgotten, is the aspiring model who claims billionaire massage enthusiast Jeffrey Epstein lured her underage self into his den of iniquity on the promise that he and his friends would help her with her career, and maybe even get her into the Victoria’s Secret catalog if Cordero would only “be nice to him,” which, in Epstein-speak, translates to standing around awkwardly while he jerked off into a towel. Cordero’s also the one (alleged) victim, that we know of, who has the distinction of being born a man (having pulled a fast one on Epstein by taking hormone pills since she was sixteen, displaying a rack that impressed many a DealBreaker reader, and using the nickname Max, which could really go either way). No one knows what goes on behind closed doors, but hazarding a guess, we’re thinking it’s a distinct possibility that things started to go south for the couple when it was revealed that Cordero might’ve been over 18 at the time of her run in with Epstein, a fact that slightly undermines the case and the millions of dollars the couple was hoping to gain. That sort of disappointment would put a strain on any relationship, even those not involving trannies, purple vibrators and old men and their toupees. Cordero’s new lawyer is Jonathan Lenoir.

Major Twist In ‘Minor’ Sex Suit [NYP]

Phil Schoonover was pretty sure it would be a bad idea to sell Circuit City. At least that’s what he told Reuters back in February.

Schoonover came over to Circuit City three years ago from rival Best Buy, to increasingly underwhelming investor enthusiasm. Of course, by the time Schoonover was talking to Reuters, Mark Wattles, head of Wattles Capital Management had disclosed a 6.5% stake in the retailer along with a vague warning that he might press for a sale, or buy more stock, or both, or neither. This had the effect of turning some heads. Wattles owns a controlling interest in Ultimate Acquisition Partners, that, in turn, owns Ultimate Electronics, and that owns 32 consumer electronics stores.

Back in February, Circuit City quickly and aggressively moved to expand its borrowing, a fairly transparent anti-takeover move, even given the company’s deteriorating cash position. For a company that had a very limited debt profile, this was unusual. Circuit City’s credit line was blown out by $800 million for a total of $1.3 billion with an option to tack on another $300 million whenever they liked. Not bad for a company that earlier that month had a mere $49.7 million outstanding against their credit facility, held nearly $500 million in cash, and commanded sales of only $2.9 billion.

It is probably fair to say that Wattle was irritated by the move. Wattle Capital Management announced on February 25 that they were nominating a slate for five seats on Circuit City’s 12 person board.

Schoonover (Swoonover?) responded with a cost-cutting plan (which presumably would reduce the need for Circuit City to take on $1.3 billion in debt) and the prospect of selling some or all of Circuit City’s Canadian stores. To say that few people were impressed might even be generous.

Since then, the plot has thickened. Wattles turned up the heat and proposed a total sweep of Circuit City’s board on February 29th. Circuit City, desperate to look like they were in control of matters, quickly showed the door to Steven Pappas the Company’s “Small Store President,” and Peter Weedfald the Chief Marketing Officer. Circuit City had dropped $6 million in bonuses back in December to retain 10 Vice Presidents and another $3 million to retain Executive Vice presidents, including Pappas and Weedfald. Circuit City then declared a $0.04 dividend last week. Too little, too late as the firm now faces being replaced in the S&P 500 by Philip Morris on March 28th. How humiliating. And disastrous for the stock price, as the shares were quickly dumped by institutions holding S&P 500 mirroring portfolios. Firms like Wellington Management and TCW Group turned nearly 20% of the shares over by themselves.

Who stepped in? D.E. Shaw & Co., HBK Investments, Royal Capital Management, and Wattles. The activists are closing in, so you might not want to sell any of the executive corps employment insurance.

Activists Circle Circuit City
[WSJ - Heard on the Street]

Hey all you sad Bears—this ought to cheer you up: Manhattan’s preeminent dominatrix, Mistress Victoria X is slashing prices! The S&M professional is offering a session discount of $10/hour (originally $2/hour but she increased the markdown after JPMorgan increased their bid) for a variety of scenarios sure to get your minds off the week you took it up the tailpipe (‘cause MVX is not proffering anal). On the menu: domestic service training, spanking combined with verbal chastising, cane stroking, interrogation and master/slave roleplay. Added value: Miss X knows a little bit about subprime. You might actually learn something!

In which I give back to the community [Miss Victoria X]
Surprise, Bear Stearns guys like it up the ass [ValleyWag]

Auction rate securities, including the auction rate preferred securities that remain frozen and often pay low interest rates capped at low levels, were sold to retail customers (including some investors close to DealBreaker staffers) by retail brokers. A key question in the lawsuits that have been filed against Merrill Lynch and Morgan Stanley, among others, is what the retail brokers told customers about the the securities they sold.

At least at one firm, we know that asset managers were told that they were to regard the securities as “cash equivalents” because the auctions had not failed for decades. Indeed, it seems that some brokers were given a “script” that urged the so sell these as “cash equivalent” or akin to “money market funds” or “highly liquid” securities.

We know this because brokers and others in wealth management groups have told us. But we’d like to see training materials that spell this out. It will be an important indicator about whether the firms themselves were selling the auction rate securities based on misleading marketing or whether, as some firms are already whispering, it was just a few overeager rogue brokers who oversold the auction rate securities. If the retail brokers were provided with misleading sales materials, they should not be blamed.

Merrill Lynch, for instance, seems to admit the auction rate securities were sold as equivalent to money market type securities in some of its documents. “Auction rate securities have generally been issued as either bonds or preferred stock and are designed to serve as ‘money market-type instruments,’” Merrill says in a document describing auction rate securities on its website.

Send any information or sales materials you have to tips@dealbreaker.com. Your anonymity will be protected.

The Bear Stearns deal is getting messier. Wall Street rivals are poaching the best talent, forcing JP Morgan to promise lots of compensation money to keep them in place or face acquiring Bear with only the losers left. Unfortunately for the best laid plans of the Fed and JP Morgan, the uncertainty over the deal is leading many Bear employees to figure they’d be better off taking offers from competitors.

So now Bear is fighting back, asking a New York State court to issue restraining orders against departed brokers who Bear claims are soliciting the firm’s clients to do move their business to the new company, Kate Kelly and Robin Sidel of the Wall Street Journal are reporting. These solicitation lawsuits are nothing new on Wall Street but they come at a very awkward time for Bear and JP Morgan. Morale is already low. The lawsuit puts a spotlight on the fact that many of the best employees and customers may have already left the firm, and doesn’t exactly reassure worried employees that Bear is friendly toward its cubs.

One Bear recently departed Bear employee we spoke with this morning wondered how hard any former Bear employee would have to try to solicit clients away from the company.

“If you’ve read the papers, you know no-one wants to do business with Bear. They don’t hate their own contacts, though. So if you hear your broker, or the desk you dealt with, has moved over to, say, Morgan Stanley, why wouldn’t you move? Keep your business in a failing firm with people you don’t know or join the pack and stick with who you know. Not a hard choice,” he said.

Bear Seeks Restraints On Departed Brokers [Wall Street Journal]

A Decade Later, John Meriwether Must Scramble Again (WSJ)
The recent struggles at John Meriwether’s (ex-LTCM) have been documented elsewhere, though the WSJ brings everything up to speed. His big bond portfolio is down a cool 28 percent this year, though more significantly they’re dealing with a potential wave of redemptions that they’re trying to stem. There’s a lesson here. It’s not that Meriwether is a bad money manager. We have no idea on that count. And it’s not that he’s unlucky. Again, same. It comes back to the old, old cliche: that you’re better off losing a ton of money in one of the biggest high profile fund collapses of all time then in just a moderately bad one. Cause any fool can lose $100 million of OPM.

Prudent Bear’s Approach Delivers Payoff (WSJ)
Amazing interview with David Tice, the longtime manager of the short-oriented ‘Prudent Bear’ fund, which has been doing well of late. Tice has been a bear for a long, long, long time. Well before anyone coined the term .com bubble. If you ever catch him on CNBC, he just looks like a bear. Very dour. Anyway, the interview: first amazing part is that he apparently went on a date recently (of course he’s not married) and when he described his macro view to his date, the date was ruined: “You can almost feel the energy go from the room.” Awesome. That’s like the coolest story we’ve ever heard. We have to imagine going on a date with the guy would probably be as fun as going on a date with Ralph Nader. The second best part: where he says down at the end that he really wants to get bullish again. Yeah. Right. No. Way. The dude likes being the negative guy. The contrarian who talks about bubbles everywhere as far as the eye can see. We’ll be shocked if we live to see the day he turns positive.

GE and Santander Reach Preliminary Agreement
A little spit swapping from GE and Banco Santander, based in Spain. The latter will acquire GE Money businesses in Germany, Finland and Austria and Its Card and Auto Financing Businesses in the UK. The former will acquire Interbanca, which Santandar got through acquiring ABN. The transactions are valued around 1 billion EUR.

Clear Channel Communications Comments on Temporary Restraining Order Granted in Merger Case by Texas Judge
Clear Channel said in a press release this morning that a Texas judge has granted a “temporary restraining order” against the banks, who are looking to walk away from their funding commitments. No, the banks aren’t stalking, they just want to save a few billion. From the announcement: “We are pleased that the Banks and the Purchasers will now be able to move quickly to complete the loan documents and fund the Merger.” Somehow we doubt it will move that quickly.

It seems my background check, part of my new-hire process, has pulled up some flags. My postings here on DealBreaker will, therefore, not appear in my name. Whoever that woman in the back office is, she won’t add my name to the system until the little issue with the FBI is resolved, so in the meantime I’ll just have to make do with this somewhat crippled account.

The great binge-purge cycle of investment bank human resources has drawn, it seems, into its second half. (Maybe we laid off completed a headcount reduction in our IT group this week and no one told me). Be that as it may, I happened across a recent victim of the vomitous expulsion of bankers onto the porcelain sidewalks of Wall Street, and took some time to interrogateinterview the poor soul.

10:49:58 AM equityprivate: I’ve always been curious about this big bank layoffs and the process. How did you find out? Was it a “pink slip” literally or what?

10:51:27 AM FormerBBEmployee: They call you into a private area, away from where you normally work, and explain what’s happened. As for the pink slip, not at all. It’s a packet of information that details what you get for being canned.

10:52:26 AM equityprivate: A packet? Like the reverse of a “New Hire” packet? What’s in it?

10:53:08 AM FormerBBEmployee: Actually, it is similar to a new hire packet. It goes into what money they owe you, benefits, contacts in H.R. … Of course, there is no mention of anything being “at will” …

10:53:44 AM equityprivate: So, there is a… what… printout of what the bank thinks it owes you?

10:54:26 AM FormerBBEmployee: Even better. A legal document they want you to sign. It says what you get, what you get if you sign, and what you were getting.

10:54:49 AM equityprivate: That’s insidious.

(See the rest after the jump)

$$$ Bear should expect no sympathy [TheDeal]

$$$ Wesley Snipes’s tips for filing your 2007 tax returns [NewsGroper]

$$$ “Yahoo Sucks”— Tim Sykes [TS]

$$$ The Bear Stearns Companies Inc. (BSC)

Clear Channel and the two private equity firms that planned to take it private, Bain Capital and Thomas H. Lee Partners, plan to sue Citibank and other lenders, The Deal Is reporting.

Shares of Clear Channel dropped softly yesterday after The Wall Street Journal reported on its website that the banks and the buyers had “failed to resolve their differences over final financing terms” and warned the deal was near collapse. The Clear Channel deal would be one of the biggest leveraged buyouts to collapse in the credit crunch.

“Clear Channel plans to file suit in state court in Texas for tortious interference with its buyout agreement. The buyers will sue separately to enforce the debt commitments given by the banks. Those agreements are governed by New York law, while the buyout agreement was struck under Texas law and the parties agreed that any disputes would be litigated there,” The Deal’s Scott Stuart writes.

The lending syndicate includes Deutsche Bank Securities Inc., Credit Suisse Securities LLC, Morgan Stanley, Wachovia Bank and Royal Bank of Scotland plc, according to the deal. All could be sued along with Citi.

Update: It’s on. The Wall Street Journal just reported that the two lawsuits have been filed.

Clear Channel, PE firms poised to sue lenders over buyout [The Deal]

SAC Capital psychologist in-residence Ari Kiev has a new book out. In Hedge Fund Leadership, Kiev shares the tools all leaders must line their arsenal with in order to inspire peak performance in their traders and money managers. It’s based on the principles he’s put into practice up in Stamford, which have made what started out as a 2-bit boiler room into the powerhouse fund it is today.

Tool #1: I tell all my patients that pecs are good but breasts are twice as nice. Having taken the Hippocratic Oath, I cannot in good faith write prescriptions for estrogen without meeting with you or your employees first, but I can tell you that there are ways to get around this. Many of my patients have done so.

Tool #2: Traders are like children and dogs. Reward them when they do something good and they’ll make every effort to do something good again, such as make you money. The actual treat is up to you, I just like to tell people to tailor it to their personalities. One of my more notable patients likes to give out deep fried Oreos when his people execute profitable trades. They seem to enjoy it (probably because he has a fryer in his office, so they come out piping hot).

Tool #3: Let your dysfunction work for you. If you were born paranoid as shit, instead of shying away from it, embrace your psychological disorder. Turn your fortress mentality into a sport, and demand that your employees follow suit. For instance, one patient of mine has built a ‘funnel cake tower’ that surrounds his desk. He encourages others to do so as well, with the proviso that he is allowed to ‘lay siege’ to the fortresses at his will.

Tool #4: Nicknames. I find these are a great way to foster camaraderie, not unlike like the kind of camaraderie you’d find in a fraternity house or on an ante-bellum slave plantation. If you run a company whose size renders individual nicknames impossible, you can modify this tool to work for you. One patient who’s made me a wealthy man many times over working through his cornucopia of neuroses manages a firm with over 800 employees. Therefore, everyone is referred to by the same moniker: Shemale. It’s a little less personal, but I find it still gets the job done.

Tool #5: Crank up the energy level in your organization. Some managers like to use amphetamines, other methamphetamines. One favorite patient of mine uses what he calls a “holistic approach” to energizing the troops. Apparently it boils down to an hourly injection of high-fructose corn syrup. As a doctor, I find this somewhat unhealthy, but he says it gets results like no other. Said this patient: “Outsiders think in-depth research/a top-notch ability to get information first is our edge, but, really, high-fructose corn syrup is the engine that drives this firm.”

Tool #6: Hire the right people for the job. Don’t focus on pedigree or training; they can come from anywhere. One patient who’s spent a lot of time on my couch hired the actor Gary Busey after meeting him at a holiday party, which Gary was catering. GB now heads up one of this patient’s most profitable portfolios.

The Hedge Fund Edge [Forbes]

Over 200 protesters from a housing advocacy group made it inside Bear Stearns corporate offices at 47th and Park Avenue. The protest was organized by the Neighborhood Assistance Corporation of America, which was founded by union activists. (They were the ones in the yellow shirts.) After being ejected from Bear’s lobby, they headed over to JP Morgan Chase. And, a few moments ago, they seem to have wandered off to do whatever it is demonstrators do after a demonstration. (We’re guessing: wait in TKTKS line for Xanadu tickets.)

The protesters object to the Fed-led rescue of Bear Stearns by JPMorgan Chase and demand what they call “real solutions” to mortgage difficulties faced by homeowners. They advocate the implementation of a homeowners initiative which would stop all the interest rate increases, roll back the interest rate increases to the initial qualified rate, impose a moratorium on all foreclosures and require the mortgage servicers’ to pursue a loan restructure that reduces the interest rate and/or outstanding mortgage to a mortgage payment the homeowner can afford for the remaining term of the loan.

Update: Reuters now has a story on the protest up on its wires and CNBC has video of the protest.

A class action lawsuit was filed in federal court yesterday against Merrill Lynch, hours after we reported that Merrill had been threatened with suits by brokerage customers whose assets were frozen in auction rate securities. Merrill is the latest entrant in a club that includes Morgan Stanley, Deutsche Bank and UBS, all of whom have been separately sued over alleged deceptive marketing of auction-rate securities.

Merrill also faces a separate arbitration claim from ASTAR Air Cargo, which seeks compensatory damages of $9.125 million and punitive damages of at least $27.375 million. ASTAR, an air carrier based in Wilmington,Ohio, filed the claim with the Financial Industry Regulatory Authority to gain access to ASTAR’s funds that currently are frozen in illiquid auction rate securities in the company’s Merrill Lynch account.

According to ASTAR, the air carrier instructed Merrill Lynch to place its cash reserves in products that would provide complete safety of principal and complete liquidity. In response, Merrill Lynch reportedly recommended the company purchase various ARS.

Update: Here’s a copy of the complaint against Merrill.

Merrill, Morgan Stanley sued over auction rates [Reuters]
ASTAR alleges Merrill Lynch fraud [Willmington New Journal]

In chronicling the near-collapse of a 85 year-old firm, a sober voice is required to distill the hubris, folly, carnage and ultimate tragedy found within. That voice belongs to Charlie Gasparino. The Post reports that the CNBC on-air reporter will receive a $400,000 advance from HarperCollins to write the definitive guide to the fall of Bear Stearns. Early drafts are said to have stoked some angst among editors because Gasparino peppers his prose with exclamations such as the following excerpt: “For some, the most apparent sign of Cayne’s disregard for the mounting difficulties at Bear came in August 2007, when he left a conference call early to play golf. Mamaluke!”

Nonetheless, rumors are already swirling that the account is destined to become a classic and notch for Italian-American pride. Sources tell DealBreaker Gasparino is so confident about the book’s success that he’s already pricing contractors to redecorate his Rego Park palace with Formica countertops and “more marble columns.” Proposed titles include: I Hear Tings, Jimmy, The Fuckin’ Beating That Bear Stearns Took, I’m da boss, I’m da boss, I’m da boss, I’m da boss, I’m da boss… I’m da boss, I’m da boss, I’m da boss, I’m da boss, I’m da boss, I’m da boss, and When Mooks Fail. An audio book will be released as well. We’ve obtained a rough cut of the first few chapters, after the jump.

This would be funny if parking lot spot market employment for white collar jobs didn’t look like a best case scenario for so many people right now.

Update: We’re told that this clip is from a short film created by Screaming Frog Productions.

The entire editorial staff of DealBreaker is being let go. Starting tomorrow, it’ll be written by Andrew Ross Sorkin.

On to another, even schlockier DB: Did a bunch of directors and VPs in Deutsche bank Lev Fin get laid off yesterday? Are cuts in industrials and consumer happening today? That’s what we’re told, though our tipster is French and still pissed about the Maginot line so who knows if he’s to be trusted. Biases aside, it would be a plausible solution to the German bank’s “profitability problem” for 2008.

Update: Deutsche Bank’s troubles are a pretty good indicator of how badly things are going for global finance. Last month, Deutsche Bank reported a 48 percent decline in fourth-quarter profits, but said it had no subprime write-downs. Got that? Deutsche Bank is suffering huge profit declines and (maybe) laying people off despite not being exposed to the subprime sludge its rivals and Wall Street competitors have all conveniently made their fall guy.

In a move which can only be deemed totally out of character, Oppenheimer analyst Meredith Whitney wrote in a new research note that things are looking good for Citigroup, and estimated an increase in profits by $2.00 a share for the year.

Everyone has been expecting lawsuits under federal securities laws to be filed by Bear Stearns investors. But perhaps more important is the Delaware lawsuit linked in Opening Bell today. The Delaware suit has been filed by investors seeking a higher price than JPMorgan Chase’s bid of $10 per share. They’ve asked a Delaware judge to stop the deal. Gordon Smith, on the Conglomerate, argues that they probably won’t win.

Larry Ribstein, at Ideoblog, agrees. “In my view, in both cases [that the plaintiffs are likely to rely upon] the essential issue should be whether the board exercised its fiduciary obligations to preserve shareholder value, which is what the shareholders as a whole wanted them to do. And in both cases it arguably did, because the deal protection move secured the only promising deal in sight – in Omnicare, the Genesis bid, and in Bear, the quintupling of the Morgan bid,” he writes. Interestingly, this sheds new light on JP Morgan’s decision to raise the bid: it may help it sail through Delaware courts more easily.

Bear Stearns Investors Challenge JPMorgan Share Deal [Bloomberg]

This terrible video just about proves that business school makes comedy impossible.

Hoarding by banks stokes fear over crisis (FT)
This has been a key issue for a long time, but we have to imagine the implosion of Bear Stearns has only made this more acute. By all metrics, banks continue to be stingy over their cash. They won’t lend it out, not even to other banks. Borrowing costs continue to rise, even after central bankers make moves to lower interest rates. Eventually, you’d think that they’d be able to make the spread big enough, to make it worthwhile… but when you’re fearful that the money will never come home, a few basis points doesn’t pay back the peace of mind you get from being solvent.

Wall Street May Face $460 Bln in Losses, Goldman Says (Bloomberg)
Just another estimate for how much there is to lose. Almost half a trillion. Of that, about half of the loss will be from residential mortgages, says Goldman, 20 percent will come from commercial real estate, with the rest coming from other stuff, like credit cards. As the firm said in its report: there is a light at the end of the tunnel. But it’s a long tunnel.

Deutsche Bank Says Worsening Markets May Affect Goal (Bloomberg)
This is not exactly a warning… more of a likely warning, as Deutsche Bank says it’s going to be tough to reach it’s full year profit goal, given the worsening conditions of the market. Or as they put it in financialese, the economy will “adversely affect our ability to achieve our pretax profitability objective.”

Banks Balk at Paying for Clear Channel Deal (NYT)
Shares of Clear Channel were crushed last night, after a WSJ report said its sale was on the verge of falling apart. NYT follows up on the story, adding the bit about Clear Channel and its private equity backers hoping to get the deal done in court, in case the financing banks try to bolt. This seems inevitable. The banks do wwant to run away and they’ll invoke anything they think resembles a loophole. The sellers will disagree and either they’ll come up with some big penalty or have a day in court.

Big Task: Digesting a Bear (WSJ)
The integration of Bear Stearns and JPM is proceeding apace. As one party put it, it’s like they’re dating after the marriage, figuring who and what and how everything will work out. JPM has its own security guards decamped at Bear (is that so that its own employees can work without fear of attack?) and top executives from the two parties are in constant meetings. No date yet on an official plan, though it’s expected in the “coming weeks” which could mean anything. Meanwhile, two pension funds have sued to stop the deal, but that’s predictable, and probably not too worrisome at this point.

Stocks Tarnished By ‘Lost Decade’ (WSJ)
Not that this is news or anything, but stocks are basically where they were 9 years ago. Stock-wise, it was a lost decade. But economy-wise, it was pretty good, no? Did you have wi-fi 9 years ago? Probably not. Heck, there’s a good chance you didn’t have a laptop — possibly not even a cellphone (I didn’t). The list goes on… all kinds of items and lifestyle goods that there’s no way you had access to 9 years ago, which, in our book, is exactly what we want to see out of an economy. It’s worth noting, that for many years during this period, stocks were well underwater. So the fact that we’re even back to even, is a reflection more of coming out of the post-bubble hole, rather than the recent slide.

$$$ Deals: Paced by the Pit, Paper, and Pepsi
In our M&A Roundup for the week ended March 23, M&A volume doubles as the three biggest deals bring new owners for the New York Merc, Weyerhauser assets, and a Russian juice brand. [CFO.com]

$$$ Welcome to the fourth branch of government [NewsGroper]

$$$ SocGen loves rogue traders until they lose money. [Bloomberg]

That used Bear Stearns tee-shirt that some guy in Ohio won four years ago and used to work out in sold on e-Bay for $151.76. Still up for grabs: a Bear Stearns cafeteria card, football, windbreaker and pen, plus Jimmy Cayne’s roach clip and favorite grav-bong.

Sold! Bear Stearns T-shirt gone for $151.76 [Reuters]

When Bear Stearns looked like it would go for $2 a share, there was a lot of sympathy for investors who stood to lose tremendous amounts. Employees—who own about a third of Bear—faced not only losing their jobs but their savings as well. So when they gnashed their teeth and hollered that their firm was being stolen by a conspiracy led by the Fed and carried out by JP Morgan Chase, it was just plain polite not to point out that their firm was on the verge of bankruptcy, that its failures had arguably put the larger financial system at risk and that what little they were getting was the result of a government-led bailout.

But now that the price of the deal has risen to ten dollars and shares are trading even higher than that, the backlash has begun. Writing for Smart Money, James Stewart writes that the protests against the rescue of Bear Stearns from insiders are “galling.” What’s more, it shows the Wall Street is all too willing to seek a government safety net when it stumbles on its free-market high-wire act, he argues. The profits from risk are private, but the losses are all too public.

Having artfully solved a thorny problem a week ago, the government has now embraced a deal whose terms reek of the bailout it was at such pains to avoid. If the government is willing to bestow such a windfall on a James Cayne, where will it it stop? Why should other financial firms reduce risk and shore up their capital? What discipline will the market ever be able to impose? Future disasters will only be worse, which will dwarf the immediate cost of the current rescue.

Yves Smith at Naked Capitalism is even more blunt, and he criticizes the media for being too sympathetic to Bear’s employees and investors. “Bear was going to fail as of Monday,” he writes. “Bye bye equity and many if not most jobs. How hard is this to understand? I thought anyone who was remotely financially literate understood what bankruptcy means. The employees should be grateful to get anything. But no, the media slavishly accepts their sense of entitlement.”

No Tears for Mr. Cayne [Smart Money]
Bear: Did the Fed and Treasury Push Too Hard? [NakedCapitalism]

Merrill Lynch has big plans to layoff ten to fifteen percent of its investment banking staff over the next week or so, according to DealMaker. The cuts are said to affect employees low and high, and may be related to a big writedown MER’s got in the hopper. Any connection between the 300 pink slips and the pink tops stolen out of John Thain’s daughter’s dresser drawer over the weekend? You tell us.

Merrill Rumored to be Planning Layoffs, Facing Huge Writedown [HousingWire]

More auction rate securities lawsuits are hitting the courts. A lawsuit was filed today in federal court in Manhattan alleging that Morgan Stanley “deceptively marketed” auction-rate securities as cash alternatives, Market Watch is reporting.

“Instead of disclosing the true nature of ARS and the substantial liquidity risks associated with them, Morgan Stanley continued to push as many ARS as possible onto its customers in order to unload the inventory off its already troubled balance sheet,” the lawsuit said.

The complaint seeks to compel Morgan Stanley to refund investor money by having it rescind millions of dollars of ARS transactions. It also seeks compensatory and punitive damages. The lawsuit is being brought as a class-action suit on behalf of thousands of investors who acquired auction-rate securities from Morgan Stanley between March 25, 2003, and Feb. 13, 2008,.

Similar suits have been filed against Deutsche Bank and UBS. Merrill Lynch has also been threatened with lawsuits by investors, although none have been filed. Goldman Sachs has been rumored to have been quietly bailing out some customers, including high ranking Goldman executives, whose assets were frozen when the auction failes.

Morgan Stanley sued over auction-rate securities marketing [Market Watch]

It might seem like we’re cynical, unfeeling assholes over here but I would just like to point out that we see the silver lining in every situation. For instance, tensions are running high at JPMorgan and Bear Stearns, and Jamie Dimon had to work on a holiday that he doesn’t actually celebrate, and thousands of people are going to be fired but there’s still money to be made.

Enter: the little pool we’ve had going on here since the whole BSC thing went down, regarding when the ‘r’ word would be dropped. I said before this week was up, Carney said May 16th. I won ten bucks today when “Huffington Post” blogger Jill Brooke wrote that Jamie Dimon “was able to financially rape Bear Stearns employees with a bargain basement bid sanctioned by the Treasury Department that wiped out years of deferred compensation.” The fact Carney’s annual take home is now in my pocket is pretty nice but it’s not the most exciting part. We didn’t even have money riding on this but were extremely pleased to see Brooke upping the ante and reporting that Dimon’s attempts to bar other banks from hiring away BSC employees who still have their jobs before the deal is completed is an act of “enslavement.” She seems to get a little confused, though, and later refers to the slaves as “refugees” but that’s a minor detail (which she should go back and edit). Anyway, take back the night rally tomorrow at 383 Madison. I’ve donated half of my winnings to paint and poster boards, the least you can do is come up with some good slogans.

Bear Stearns Employees Already Financially Raped, Now Possibly Enslaved [Huffington Post]

British Prime Minister Gordon Brown and President o’ France Nicolas Sarkozy want the banks to have a frank discussion about their favorite sexual positions. Kidding, of course, but only about the sex; they really do want to get a candid dialogue going in the next couple weeks regarding how many billions of dollars in bad debts the various financial institutions ‘round the world have hanging on their books. Citi should probably start. In related news, nude photos of Sarkozy’s wife are being auctioned at Christie’s April 10th.

Britain and France seek transparency by banks [IHT]
Carla Bruni-Sarkozy Nude Photo Auctioned by Christie’s April 10 [Bloomberg]

Those of you seeking solace in the news that Jamie Dimon had to forgo his alleged Easter Sunday ritual of egg-dying and chocolate noshing are SOL: though the JPMorgan CEO played a rather convincing martyr when he told a fellow diner at San Pietro that he would be “working” over the holiday, there were two Jews he wasn’t able to fool. Jesus and myself. Jamie Dimon is Greek Orthodox. So while it might’ve seemed like a huge sacrifice to the untrained eye that the new of king Wall Street had to miss the big day in order to renegotiate the Bear deal and oversee the carpets being ripped up from Jimmy Cayne’s office, it wasn’t, ‘cause his Easter’s not ‘til April 27th. If he happens to be in the office on that day, which he probably will be, since it’ll take months to write all those pink slips, then he’ll get our sympathy. But not ‘til then.

Sightings [Page Six]

More than a month after the trouble started, much of the auction rate securities market remains frozen, leaving hundreds of millions of investor dollars locked-up in illiquid securities. No-one has come forward with a solution, and there is little hope that the market will unfreeze anytime soon. Brokers have offered to loan money to clients with frozen money but this has provoked outrage from customers who are being asked to pay a premium by the same brokerages that led them to invest in the frozen securities in the first place. And most brokerages are refusing to do what many customers demand: buy-out the customer positions.

Joe Mysak at Bloomberg reports that the problem stretches much deeper into the investor world than many suspected.

I’m still getting e-mail on this situation. Closed-end- fund, preferred-share holders, at least the ones I’ve heard from, are livid at the fund companies and feel betrayed by their brokers. I find it very odd that the fund companies and the brokerage houses feel that they can alienate this crowd.

Who buys auction-rate securities? It’s not just “the rich.” I’ve heard from self-employed people who thought it was a good, temporary place for their life savings, at least until they decided what else to invest in. I’ve heard from people who sold businesses and put the money there, and from people who inherited some money and did the same.

The amount of money ranges from $50,000 to several million dollars. In each case, the investors say they were advised by their brokers that their money was in a cash equivalent. The investors rarely looked at prospectuses.

He also notes that if the market for these securities ever does come back, we can expect a lot more regulation.

Auction-Market Investors Look to Regulator for Hope [Bloomberg]

Finally! Another episode of “Backseat Broker,” the logical companion piece to “Happy Hour,” in which a buzzed Cody Willard rides around town trying to find people who’ll get in the back of a cab with him and “talk about finance.” Something that’s new from the last time is that it appears Cody’s decided not to shave. Today’s hostage is an investment banker who works in real estate financing. Not too long ago, he was chained to his desk from 8 a.m. ‘til 2 a.m. Now, he’s got time to talk shop with C-bone in the middle of the day.

Earlier: There Are Only 6,300 People Watching This, No Need To Run A Comb Through Cody’s Hair Or Splash Cold Water On His Face

Did JP Morgan Chase inadvertently include an overbroad guaranty in its deal to acquire Bear Stearns? That’s what unnamed sources were telling journalists over the weekend. The idea was that the rushed preparation of the documentation had led JP Morgan to sign a guaranty agreement that went further than it ever intended. And when the new documentation for the raised bid emerged, that story seemed to gain credibility because the new guaranty agreement was dramatically cut back.

But was it a misstep in the original documentation or is this story spin meant to provide cover for a rethinking of the guarantee? Yesterday we spent a good part of the day explaining that the available evidence indicated that the original, broader guarantee reflected the deal that was described on the conference call a week ago last Sunday. We were lonely voices on this point, as most of the financial media seemed to have contracted acute amnesia about that conference call. Fortunately, as the day passed, the media seem to have recovered.

In this morning’s Wall Street Journal, Ashby Jones pretty much shoots down the “mistake” spin. After noting that some lawyers had “surmised” the broader guarantee was an “oversight” by JP Morgan and its lawyers at Wachtell Lipton, Jones says, “But other lawyers said the wording was in line with the intentions of at least one decision maker at the bank at the time the deal was struck, public comments suggest.”

Steve Black, the co-head of J.P. Morgan’s investment-banking division, appeared to address the issue in a March 16 conference call with analysts.

“The guarantee applies to all transactions on the books today and any transactions that are entered into while that guarantee is in place,” he said. J.P. Morgan didn’t respond to a request for comment.

The measure “seems rational,” given the circumstances at the time, when J.P. Morgan was trying to signal to the market that it would stand by Bear’s obligations, says Lawrence Cunningham, a law professor at George Washington University. “Bear was fighting for its life and a handful of forces were at play and it makes sense that J.P. Morgan would want to add credibility to the deal by giving a big guarantee.” Observers add that J.P. Morgan might not have anticipated the shareholder resistance that surfaced to the original deal.

Over at the Conglomerate, law professor Gordon Smith agrees. He wonders how apoplectic JP Morgan head Jamie Dimon really was over the broad guarantee.

“I don’t doubt that he presented the case in this way, but forgive me if this sounds like a bit of buyer’s remorse,” he writes. :In other words, Dimon’s indignation at his lawyers looks like a pretext for another problem with the original deal, namely, that Morgan no longer wanted the deal to stay open for a whole year if Bear’s shareholders rejected it.”

Did Deal Overexpose J.P. Morgan? [Wall Street Journal]
The Morgan Guarantee [Conglomerate]

HBOS Climbs After Executives Buy Shares in U.K. Bank (Bloomberg)
We love insider buys. They’re so… confidence inducing. Executive at HBOS, said to have come under a big bear raid in recent days, are buying. CEO Andy Hornby took advantage of the “false rumors” on HBOS shares to acquire another 1.4 million of them. And that’s already paid of handsomely. The stock spiked 17 percent on the news.

Bear at $10: Done Deal? (WSJ)
No, really, $10 is it. Of course if shareholders don’t sue in Delaware court for more, then there’s no doubt. $10 is it. This is your last and final offer? Are you buying shares above $10? Think you can do the same thing you did last time? Fat chance. They’re gonna take a 39.5 percent stake. They’re going to take you’re building, and then what are you going to have? Of course, if a Delaware court did strike down the deal, we’d be looking at one of the most explosive Federalist issues of all time — a Delaware court defying the will of the Fed. Would the Fed send in the national guard to overpower the court and manually put Bear’s assets into JPM’s account?

Regional Indexes Surge On Wall Street’s Gains (WSJ)
The positive-reinforcing cycle continued while you were sleeping, as the Asian markets moved sharply higher across the board. Hong Kong turnedin a monster, gaining 6.4 percent, a bit ahead of India. The Nikkei was a relative laggard, gaining only 2.12 percent.

U.S. and Canada Accuse Drug Maker of Fraud (NYT)
For those of you not following the Biovail story, you’re really missing out. Like, really. Just to make sure you know the story of the truck: the company blamed an earnings shortfall a while back on a truck crash carrying its pills. Turns out that was a lie. An analyst actually did the work himself, confirming that there was no product in the truck. The saga goes from there, but that analyst is a hero.

$$$ Britney’s Career Placed on ‘Celebrity Watch’ at S&P: “She May Be Less Popular than We Thought” [Jeff Matthews]

$$$ Comp [WSC]

$$$ Harvard Guides the Way (Again) [MuffMarkets]

$$$ Analogic Corporation (ALOG)

Merrill Lynch CEO and amateur beekeeper John Thain’s daughter, Victoria, was robbed last Friday. The thieves apparently entered the Duke junior’s apartment via bedroom window, stole $9,000 worth of stuff including her wallet, camera, and TV, and exited through the front door. Run of the mill burglary or a strategic hit from one of the many enemies daddy’s racked up over the years? The fact that nothing was taken from any of Victoria’s roommates seems to imply the latter. Suspects include: Jon Corzine, Stan O’Neal, bears and vegans, which is to say—Dan Loeb. Either way, she should thank her lucky stars that the phantom defecator couldn’t get the funds together for a trip down South.

Earlier: Presented Without Comment

Thief lifts goods from student’s apartment [The Chronicle]

Earlier this afternoon Bear Stearns has posted to its Web site the amended merger and guaranty agreements in connection with the renegotiation of JP Morgan’s purchase. Some quick takes:

• As has been widely reported, the new price works out to around $10 per share. Speculators, bond-holders and dissident shareholders have been greatly rewarded for owning BSC. People who bought credit default insurance, and wanted to vote against the deal hoping Bear would default on its bonds, were smart if they bought BSC as a hedge.

• The Fed’s role in all this has changed. Now the Fed is taking control of $30 billion collateralized by illiquid assets from Bear in exchange for its $30 billion liquidity loan. The portfolio will be managed by Blackrock, so now Merrill Lynch (which owns about half of Blackrock) is in on the deal. JP Morgan is on the hook for the first $1 billion in losses on the portfolio.

• Did the Fed fix the $2 bear price? The controversy continues. This morning Andrew Ross Sorkin said yes, while Steve Liesman said no. This morning Liesman backed off, saying his sources were giving him conflicting reports on the Fed’s role in the pricing.

• The higher price is already leading some to refer to this as a bailout. Henry Blodget reads the tea leaves and says even bigger bailouts are on the way.

• Prices for BSC blew right past that $10 price tag, and now the action is in $15 calls.

• The Deal Professor has a good summary of the changes in the agreements. Unfortunately, he’s still buying the line that the guarantee was inadvertently broad. “The amendment makes clear that JPMorgan didn’t get the guarantee they wanted on the first bite,” he writes. Don’t you believe it. The changes really suggest nothing more than that the guarantee wasn’t getting the job done and they didn’t see any need to keep it out there.

In our continuing (and continually failing) effort to provide the finest in financial musings for our readers, we at DealBreaker are pleased to announce that Equity Private, author of the much-loved Going Private blog has joined DealBreaker as a Guest Editor at least until May 1st. Ms. Private will be filling in for John Carney, who is fortunate enough to be departing for a month to enjoy a well deserved, and somewhat overdue vacation, April 4th.

For those of you who have been hiding under a rock for the last two years, Equity Private is a pseudonymous Vice President at the equally pseudonymous “Sub Rosa,” a New York based, middle market, private equity firm focused on leveraged buyouts.

Ms. Private either holds a MA/MBA or a JD/MBA (though she refuses to tell anyone which) from a top tier university. We don’t know which university, of course, but given her rather overt animosity for one in particular, we’re pretty sure it isn’t Stanford. Either way she has too many degrees, and not enough beachfront property in Sardinia (500’ really doesn’t cut it anymore).

I took a break from writing about JPMorgan and Bear Stearns all day to have a little chat with the newest edition to the stable.

Bess Levin: So, Equity, you’ll be with us from now until Carney returns at the end of April (at which point I’ll be taking a month off to just chill by the way). Are you intimidated at the prospect of having to fill Carney’s (proverbially) big shoes.

*Messing…

Despite reports to the contrary on CNBC and the New York Times, there is no precedent in Delaware law that allows a company to sell up to 40 percent of their shares without shareholder approval. Rather, there is a rule-of-thumb employed by lawyers advising clients incorporated in Delaware that tells them deals shouldn’t lock-up a sale of more than 40% of the shares if they don’t want to risk the wrath of the courts. But the rule is cobbled together from reading a variety of Delaware cases, and it has never been tested in the courts.

At issue, as Gordon Smith explains on The Conglomerate, is whether a deal will be seen as coercive or precluding minority shareholders from exercising their franchise. In one early case, the Delaware Supreme Court struck down a deal in which 65 percent of the shareholders agreed to vote for a transaction in advance of the shareholder vote. In a later case, a lock-up deal was upheld by the courts when it required the final approval by a majority of the outside shareholders to approve the deal. Lawyers put the two together and came up with the rough-and-ready rule of thumb that if you didn’t lock-up more than 40% of the shares before the shareholder vote, you’d probably be okay.

“The bottom line is that JP Morgan is trying to lock up the acquisition of Bear, but it can’t be too aggressive without triggering the wrath of the Delaware courts,” Smith writes. “39.5% plus the shares of the Bear directors who ‘have indicated that they intend’ to vote for the revised deal should get them to about 45%, and that may be enough to bring the deal home.”

This has important implications for Bear shareholders and may explain why the deal has progressed the way it has. Bear’s board had promised to sell JP Morgan 20% of the company, even if Bear’s shareholders rejected the deal. The fact that they didn’t promise more may well indicate that they didn’t feel comfortable with going as high as the 40% rule would presumably allow.

With a much higher bid in their pocket, however, they now have a better story to sell to shareholders—we got $1 billion more by just promising another 20% of the company—and, if necessary, to the Delaware courts. The board no doubt hopes that these facts will make it look as if it was acting in the interests of shareholders throughout the negotiations.

39.5%? [The Conglomerate]

Cramer raises a good question: why, of all the many, many things he’s been wrong about in the past, did Fox Business chose to dwell on his advice to keep one’s money with Bear Stearns, in today’s WSJ and NYT? Just out of curiosity.

The guarantee of Bear Stearns’ liabilities from JP Morgan Chase wasn’t working. Although the banking giant had put its “full faith and credit” behind Bear’s liabilities, some of Bear’s largest customers were refusing to do business with it. Counter-parties were fleeing, and Bear’s collateral was being refused up and down Wall Street. The guarantee, which was intended to keep Bear in business, had failed to provide customers with enough assurance to prevent a second round of the run-on-the-bank that nearly bankrupted Bear, people recently familiar with Bear’s operations are saying behind the scenes. (Guess who those people are!)

Customers were concerned that working out the guarantee would take too long and involve too much uncertainty. People familiar with the operations of Bear say that many customers simply found it easier to take their business elsewhere. They feared that if Bear shareholders rejected the deal, JP Morgan’s guarantee would not get them a quick and “dollar-good” resolution to their trades.

Now JP Morgan is claiming—albeit off-the-record through prominent business reporters—that they were forced back to the negotiating table because of “mistakes” in the contract. The guarantee is alleged to have “inadvertently included” provisions that made it overbroad and survivable even after the rejection of the deal by Bear shareholders. But this is a cover-up, an attempt to take out a provision that at least some of the JP Morgan deal team fully understood. The reality seems to be that JP Morgan wants to rescind the guarantee because it could involve serious costs without achieving the customer-assurance benefits that provided its original rationale.

What’s worse, JP Morgan and Bear Stearns quickly realized that the survivability of the guarantee would allow dissident shareholders to seek other investors while Bear stayed in business under the cover of the guarantee. The provisions of the agreements between Bear and JP Morgan require Bear’s board to continue to cooperate with JP Morgan but do not bind outside shareholders. JP Morgan, which eagerly cooperated with the Fed to buy Bear, did not anticipate the danger posed by shareholders using the 12-month lock-up period to find alternative buyers. If there was a negotiating mistake, perhaps this oversight was it.

[Hilarious ad in today’s NYT and WSJ, via MediaBistro]

In his Easter sermon yesterday, Michael Nazir-Ali, the B of R, told a rapt audience that the “turmoil in the markets is almost certainly the result of amoral forces” possessing today’s hedge fund leaders. The Bishop admonished “those with power,” who, in his professional opinion, are on the fast track to hell, unless they start ensuring “that the poor are not disproportionally affected” and showing “gratitude” for what they have (“For instance Cohen might share those Thin Mints he’s been stockpiling, and Chanos could maybe stop to think for one second that not everyone is pulling down the kind of g’s that gets the 3-diamond girls to hover, and it would be nice if, just once, he helped a brother out.”) The Bishop did not say whether or not a return to Christian living would help things out credit-wise.

Anglican Leaders Issue Rebukes To Hedge Funds, ‘Greed’ [FINalternatives]

One reason many people are so ready to believe JP Morgan’s line that the guarantee agreement was accidentally overbroad is that they don’t understand why JP Morgan would ever intentionally agree to the broad version. Why would JP Morgan want it’s guarantee to survive even if Bear Stearns’ shareholders reject the takeover offer? This sets up a seemingly perverse situation where Bear’s shareholders could seek a higher bid while still forcing JPMorgan to honor its guarantee. Clearly JP Morgan couldn’t have wanted this, right?

If the survivability of the guarantee seems outlandish now, it didn’t seem so outlandish last week. At that time, Bear was facing a modern day version of a run on the bank, with customers and counterparties fleeing for every available exit. In order to slow the exodus, Bear’s counter-parties needed strong reassurance that their trades with Bear were good and that it was safe to continue to do business with Bear. A temporary guarantee contingent on Bear shareholders accepting $2 per share might not have been acceptable to counter-parties. It may not, that is, have kept Bear in business.

And, as most accounts of the high pressure dealings of that weekend make clear, keeping Bear in business was one of the primary motivations of announcing the deal before the markets opened up in Asia. In fact, one of the first comments made by JP Morgan investment banking co-head Bill Winters emphasized that this was the purpose of the guarantee.

“Bear Stearns is absolutely open for business,” he said. “That is the purpose of the guarantee that we’ve put in place that should give ever body in the market complete comfort that when dealing with Bear Stearns you are backed by the full faith and credit of JP Morgan. So Bear is open for business today with all the credit backing that we can provide and intends to remain completely in the market up to and through the day when we complete the acquisition and obviously then afterwards as a part of JP Morgan.”

Now JP Morgan is singing a different tune but claiming it’s been the same old song all along. But those of us who were at the ball on Sunday night know better.

Anger has reverberated all week throughout the gloomy Madison Avenue offices. Cayne’s armed hulk of a bodyguard trailed him everywhere and parked himself outside Cayne’s office all day, sources said.

Bear May Have Lived [NYP]

The New York Times is suggesting that JP Morgan’s agreement to guarantee Bear Stearn’s liabilities is much broader than intended. According to Andrew Ross Sorkin’s story on the front page of this morning’s Times, JP Morgan executives were angered to discover that the guarantee would stay in place even if the Bear Stearns shareholder voted down the deal. This is being blamed on the lawyers—and on the rushed pace of putting together the deal so quickly. The Deal Professor at DealBook describes this as an “apparent oversight” this morning. (Here’s a link to the guaranty agreement, courtesy of the New York Times.)

As we pointed out this morning, we don’t think it was an oversight. On the conference call on the Sunday night the deal was announced there was a lot of discussion of the guarantee. Some of it was confusing, as much of what happens on public conference calls is often confusing. But it seems pretty clear that JP Morgan fully understood that it’s guarantee would cover Bear liabilities even if the deal was rejected.

After the jump, we present an excerpt from the transcript of the Sunday night conference call. In the excerpt, Steve Black, the co-head of JP Morgan’s investment banking division, is asked by an analyst about the guarantee. He clearly says that it will cover Bear liabilities already entered into and those entered into prior to closing or rejection, but not those entered into after the rejection.

How much fucking up can Bank of America do? About $6.5 billion worth of fucking up, apparently, minus what they’ve already done. We’re no experts, but we can’t help thinking that number sounds high. Could they really screw things up that badly on investment banking and mortgage transactions alone? Dubious. They want to justify that 6.5, they’re going to have to start hauling ass, in and outside the office. We crunched some numbers (6.5 billion divided by 31,000) and found that it comes out to about 200,000 7-diamond dawn to dawn packages. It’s highly unlikely the relatively bland management at BoA will be able to blow through it all, but if they start working now, a sizable dent could be made. Mozilo has pledged to make up the difference.

Bank of America May Face $6.5 Billion Loss [CNBC]

So a lot of businesses that count on you throwing around your disposable incomes are worried that the minor issue of you no longer having incomes to throw might negatively affect their bottoms lines. Even those of you with jobs might be scaling back, they fear, on stuff like multi-million dollar apartments, lap dances, SeamlessWeb orders and Mike’s Hard Lemonade. One guy who doesn’t seem too stressed about the sitch on Wall Street becoming his problem is Eric Bedoucha, the chef at downtown bakery Financier Patisserie. He told the Times that in his experience, people always buy cake, it just depends on whether it’s to celebrate someone being hired (“They buy a ‘Welcome to our team!’ cake”) or fired (“They buy a ‘Good luck!’ cake”). Since the bakery opened in 2002, just after the last bubble burst, Bedoucha isn’t sure what happens re: eating your feelings in the case of large-scale layoffs. Know what we’re not sure about? This whole story. Seriously, who buys a hired cake? What does it say, exactly? “Congratulations, you now report to the guy who reports to the guy who reports to the guy who reports to John Mack!”? And more importantly, who buys a fired cake? What sort of grown men are consoled about the fact that they just got canned by eggs and flour? And, okay, let’s just pretend there are some people out there who buy these Fired Cakes; what kind of asshole requests that the thing says, “Good luck,” which is basically like writing, “Take care”? Are we wrong here? Is the half of Bear Stearns that’s in the process of being let go gorging themselves on these consolation prizes? Let us know (Blarney bakes).

With Economy Tied to Wall St., New York Braces for Job Cuts [NYT]

Everyone’s talking about Andrew Ross Sorkin’s blockbuster piece in the New York Times which claims that JPMorgan is negotiating to raise its bid price for Bear Stearns in an effort to win over reluctant shareholders. A lot of people who bought shares above the supposedly locked-in sale price last week are smiling today.

One part of the story, however, doesn’t make sense. JP Morgan is apparently now claiming, behind the scenes at least, that the original merger contract included several mistakes, including the clause that allows JP Morgan’s guarantee of Bear’s trading position to survive a vote against the deal by Bear Stearns shareholders. Jamie Dimon is reportedly “apoplectic” that this provision was “inadvertently” included in the deal.

This story can’t be right. We were on that conference call on Sunday night, and this provision got a lot of attention on that call. The JP Morgan bankers were very clear that the guarantee would survive a negative vote by Bear Stearns shareholders. The guarantee would survive the life of the guaranteed transactions, JP Morgan’s bankers said on the call.

There was a bit of confusion on the call about this provision, so that those on the call had to ask about it several times. But clearly everyone involved was focussed on it. So why are we suddenly being fed a different story through Andrew Ross Sorkin?

JPMorgan in Negotiations to Raise Bear Stearns Bid [New York Times]

JPMorgan in Negotiations to Raise Bear Stearns Bid (NYT)
The speculators may get paid off: JPM is said to be considering a quintupling of its original bid for Bear Stearns, meaning it would pay $10/share, rather than the original $2. Despite all this talk about folks sopping up the stock at any price just so they could vote for the $2 offer, the move is seen as helping JPM win over shareholder holdouts. According to the report, it’s the Fed that’s hesitant to see the renegotiations, partly because it doesn’t want to have seen as engineering a bailout of Bear shareholders.. If the two sides do agree on the $10 price, Bear may invoke a rule, legal under Delaware law, allowing JPM to buy up to 39.5 percent of the company without shareholder approval. Caveat investor: the talks could still collapse at any moment.

Revealed: the dirty tricks of rogue traders (Telegraph)
Lots of talk across the pond about the so-called recent ‘bear raid’ on HBOS. The Telegraph offers a major expose on the whole thing, including several juicy details of it, like: the creation of front companies to disseminate faulty research, hacking into corporate email systems, money germinated out of Sinagpore, money paid to jurors in a case involving the company, etc. The only thing the Telegraph won’t say about all this: the name of the fund, which it claims if for legal reasons. Anyway, you might want to read the whole thing to get a better sense of this. Definitely will be worth following. (via Daily Caveat)

Who Says You Can’t Go Home Again? (WSJ)
Former executives at Countrywide are getting back in the game. With support from Blackrock, a group of colleagues led by former President Stanford Kurland are setting up a new distressed mortgage venture, whose aim is to actively go in and restructure non-performing loans and then restructure them — flipping them for a profit. The name of the firm is simply awesome: Private National Mortgage Acceptance Company LLC, or PennyMac. The fund will have $2 billion and be based in the same Cali town as CFC.

Oil, Gold Decline on Dollar Recovery; Wheat Rallies on Supply (Bloomberg)
Commodities and the dollar looking to be continuing their actions off of last week, though these things flip around in an instant. God hit $906 per ounce, while certain oil contracts are around $100. One Euro meanwhile is worth $1.53. Looks like Bernanke really has been vindicated.

BEAR MAY HAVE LIVED (NYP)
Chairman Cox says Bear might’ve lived, cause it had plenty of liquidity. It just didn’t have confidence — a point we’ve discussed multiple times in the past. Frankly, we’re not sure it matters either way. There’s not really a second prize for having had liquidity, but no trust. But, as Gordon Smith at the Conglomerate points out, maybe this vinidicates Cramer a little bit. Or maybe the CEO Alan Schwarz for that matter.

BoE, Fed deny mortgage security buyout plan (Reuters)
Don’t believe everything you see linked-to from Drudge. At least officially, there are no plans for a major bailout via central banks acquiring massive amounts of mortgage-backed securities on the open market. This had been reported by the FT, though both the BoE and the Fed say it’s not true. On the other hand, the BoE says it has certain unspecified tricks up its sleeve.

- UBS AG is looking for a soft commodities broker in London. Salary is listed as “attractive” which sounds like it ought to be better than “competitive” but who knows. Adjectives can be very misleading.

- Hogan’s Heroes are looking for a senior financial analyst. Could be fun.

- SAC needs someone to develop new quantitative trading strategies, plus a P&L guy to figure out if they’re making any money.

Career Center [DealBreaker]

Tim Carney, who specializes in showing how businesses use government as a mechanism to secure profit, takes a look at former Tiger Management fund manager Julian Robertson’s environmentalism. Turns out he stands to make a bundle from costly alternative energy sources as well as an economic downturn brought about by higher energy costs.

Nice work if you can get it.

A bigger Robertson bet, presenting a more insidious angle, is his short position on 10-year Treasury bonds paired with a long position on two-year Treasuries. Basically, if the U.S. economy is fundamentally unsound, Robertson gets rich. “I’ve made a big bet on it,” Robertson told Fortune. “I really think I’m going to make 20 or 30 times on my money.”

Robertson sees lots of reasons for an impending downturn, but severe restrictions on coal and petroleum use would help along a recession. A study released last week by the National Association of Manufacturers reports that leading climate change bill S2191 (which Akin Gump is now pushing) would, in the year 2030, cost the gross domestic product at least $631 billion, cost 4 million jobs, reduce household incomes at least $4,000, double electricity prices and nearly double gasoline prices.

Such a report, funded, albeit, by a trade group opposing the legislation, highlights both the down sides of climate-change legislation and a possible up side to the legislation for a man betting against the U.S. economy.

Commodities Drop, Rally in Dollar, Stocks Vindicate Bernanke (Bloomberg)
It was a Holiday-shortened week, but he’ll take it. Judging by articles like this that proclaim Bernanke “vindicated”, the unfairly maligned Fed chief had a good few days. Other than angry Bear shareholders, people seem to be in a good mood, as stocks, the Dollar and commodity prices are all moving sharply in the “right” direction. So is the worst behind us? Have we seen the whites of the markets eyes? Uh. Somehow we don’t fully feel comfortable making a prognostication after just four days. But please, more whites of the markets eyes references in the press, if possible. Also: props for letting us enjoy our long weekend without a major financial meltdown to stew on.

Selling Lauren Conrad (WSJ)
Lauren Conrad, one of those famous for being famous types, and star of some MTV reality show is full on trying to turn herself into a brand. This is a good idea. Not because we’re fans (does she actually have fans?). But because personality-driven brands are the way to go these days. Let’s be realistic for a second. Would people stop watching Lauren Conrad if she jumped to, say, ABC? We’re guessing it wouldn’t be an issue. Or take any writer for a blog or the WSJ: would you stop reading them at a different site? You probably wouldn’t even notice. That’s why Martha Stewart bought up Emeril. Individual names are growing in significance, while the containers they used to operate within are disappearing. Jordans these days don’t even have the Nike Swoosh on ‘em.

Verizon and AT&T Win Big in Auction of Spectrum (NYT)
Think about this for a second: The just-concluded wireless spectrum auction brought the US over $18 billion. Meanwhile the just-concluded Visa IPO (“V”) was for about $17 billion… let it sink in. Interesting eh? Ok, not really. Those just happen to be two numbers separated by about a billion. No significance metaphysically or economically at all. Anyway, the big winners: Verizon, AT&T, and even EchoStar picked up a big chunk. Google bid, but didn’t ultimately walk away with the slice. It’s sort of trendy to say that Google “won” by not winning, but by triggering the FCC’s open access requirements, but whatever. They didn’t win.

OFF THE STREET(NYP)
NYP adds to the Goldman layoff talk, saying 15 percent of the capital markets unit.

Arianna Bests Drudge? (All Things D)
We’re total Drudge nerds and we’ve never quite “got” the Huffington Post, but we’re still intrigued that the latter may have passed the former in traffic, at least according to one measure. After all, Drudge is Drudge. And, when Huffington Post launched it was seen as a liberal answer to Drudge. The thing is: HuffPo actually has content. Real, searchable, archivable content. That means that people stay on the site and, critically, it shows up in searches. Adding to their search juju, I’d imagine, is the fact that they have snippets of various wire stories, stuff like that, extending their content beyond folks like Lanny Davis and David Simon. And when was the last time Drudge turned up in a search, except when you were searching for “Drudge”, because you didn’t have him bookmarked or because you were too lazy to type in drudgreport.com. So while the traffic growth at Arianna is impressive, Drudge’s traffic is more so, and we’re pretty sure that there’s still no bigger traffic firehose than this site.

Japan’s Nikkei up 1.8 pct as banks, brokers gain (Reuters)
While you were sleeping: The Nikkei jumped 1.8 percent on Bern Bernanke’s heroics. The losers: of course, the commodity players on the market.

DealBreaker will be on a reduced publishing schedule in honor of Good Friday. As always, the community section remains open for readers to begin your own discussion threads.

$$$ Q: My question is where are you currently employed.
A: I’ m not. I just told [you] I work for free.
Q: OK. You’re not employed by the HTFC Corporation?
A: Hit That Fuckin’ Clown. That’s what it means. [Consumerist]

$$$ “Eat or be eaten”— Steve Schwarzman [NewsGroper]

$$$ JPMorgan Using Bonuses to Keep Bear Stearns Staff [CNBC]

$$$ To All My Haters Out There, This One’s For You! [Tim Sykes]

At times like these, with Bear getting flushed down the 14th Floor Mens, you school girls need a voice of authority to give you a sense of history. Show you how we got here. That voice is me. So gather round, kids. Lesson time, courtesy of Bessie’s History of Bear Stearns: A Timeline.

— 1923: Bear Stearns is founded as an equity trading house by Joseph Bear, Robert Stearns and Harold Mayer with $500,000 in capital. While he felt “gipped” at the time, Mayer and his descendants are pretty psyched that they voted ix-nay on Bear Stearns Ayer-May. In a remarkable symmetry, Bear will probably end up with the same $500,000 it started with in 1923.

— 1955: Bear Stearns opens its first international office in Amsterdam. Later that year in the same city, Purdue dropout-cum-future Bear Chairman/CEO-cum-Destroyer of All Worlds Jimmy Cayne, then 21, consumes his first pot brownie.

— 1969: At a New York bridge tournament, future Bear Stearns CEO Alan “Ace” Greenberg meets a 35-year-old Jimmy Cayne, then gainfully employed as professional card player. Impressed by Cayne’s stage presence and pluck, Greenberg offers him a job as a Bear stockbroker on the spot, without seeing a resume or checking references. As they sealed the deal, Greenberg famously said to Cayne, “What’s the worst that can happen? You destroy $100bn in shareholder capital?” As far as we know, it is the only instance of an individual being hired for a Wall Street job at a bridge tourney.

— 1985: Bear Stearns becomes a publicly traded company, because this is too good a deal to keep from the average investor.

We’re a hardened lot here at DealBreaker. We laugh in the face of our failures. As regular readers know well, we try to provoke laughter at the failures of others. So it was surprising when we found ourselves getting a bit choked up this morning as we read the Metro section of the New York Times. Peter Applebome rides with the commuters from Chappaqua to discover fear and self-loathing aboard the 6:13.

The pilgrims from Chappaqua trudged in from the cold drizzle Wednesday morning and gathered in drowsy silence like crows on the covered overpass above the tracks until 6:11, when someone said, “It’s time to get our heads bashed in.” Thus inspired, they descended to the platform, piled onto the largely empty cars, and then, either asleep, reading a newspaper, or with heads bowed as if in prayer over BlackBerrys, journeyed in silence on the 32.4 miles to Grand Central.

There’s no happy ending to the story, unless you count Applebome’s buddhist-stoicism as a version of happiness. As they say on the internet, read the whole thing.

Bear’s News Is Bad News on the 6:13 [New York Times]

GaldalFed: Hey, Boss! How’s everything? Just reading a Bloomberg article that mentioned both of us, and I thought I would drop you a line.

Maestro69: Sec

GaldalFed: Sure, Sure.

Maestro69: Ok i’m here. What did it say? I myself have refrained from reading the newspapers since back in, oh, 2004.

GaldalFed: You the man. Anywho, it’s funny — a little embarrassing actually—

Maestro69: It wasn’t another of these guttersnipes trying to blame me for the contracted period of economic dislocation, was it? Shit, hold on, dropped the phone in the tub.

GaldalFed: Sure, sure.

GaldalFed: No, it wasn’t relaly about you you. It was about how I bought a house at the peak of the market. ‘Member?

Maestro69: oops.

Maestro69: Not particularly, no.

GaldalFed: Why would you, right? Anygay, it says all this stuff about how the housing recession has ‘literally arrived on the doorstep of Federal Reserve Chairman Ben S. Bernanke.’

Maestro69: Sec.

GaldalFed: We can chat later, no biggie.

Maestro69: Please, continue, I just have this speech to give to UBS tonight. Kaching! I’m jostling, of course.

Maestro69: What does this article have to do with me?

GaldalFed: Well, I didn’t know if you remembered. But I asked you at the time, ‘Hey, Boss, there’s this 2,600sf house right in downtown selling for $839k. Sweet deal, but it’s a bit of a stretch? Sound familiar?’

Maestro69: I don’t recall. What sagely advice did I convey?

GaldalFed: That’s the thing, Big Guy. You suggested I get an adjustable rate mortgage that resets after three years.

Maestro69: ROTFLMAO. shit dropped the phoen again.

GaldalFed: k

Maestro69: back.

GaldalFed: hey…anyway, thing is, even though the thing with the ARM seems funny, it just reset and this mortgage is tearing the ass out of me.

Maestro69: What does this have to do with me? I certainly couldn’t have foreseen how taking a mortgage at a time when interest rates were at emergency-low levels on a house you couldn’t otherwise afford could pose unforeseen difficulties.

GandalFed: C’mon, Alan. Don’t go all Robot on me; this is Benny! Not Ted Kennedy. Can’t we just talk like humans?

Maestro69: Does not compute.

Maestro69: Kidding. What is it, Benji?

GandalFed: I know you said I can make serious dough on the i-bank circuit when I’m gone, but right now, Boss, I’m in a fix. I could use a little scratch, just for a few months.

Maestro69: Why are you coming to me?

GandalFed: Well, jeez, let’s see. First off, you said things were in pretty good shape when I took this gig, and it doesn’t really look that way, does it? Plus, because you put me in touch with the Mo Hazard guy on the option ARM, you made this an issue I’m taking home with me, too.

Maestro69: First off, don’t ever impugn the integrity of Angelo — neither he nor I could have ever seen this coming. He is HEARTBROKEN over this.

Maestro69: Second, you little Ivy League puss, if you thing you are going to pin one iota of the blame on me for what is happening, you can kiss the recommendations for the lecture circuit goodbye. Good luck raising the dough at Princeton, Benjy. Why don’t you go cry to your thesis advisor like you always do. Big Al has money to make.

Maestro69 has signed off.

GandalFed: Are you blocking me again?

Maestro69 is not online.

Bernanke’s Own Home on Capitol Hill Shows Housing Boom and Bust [Bloomberg]

*Like I’m a homeowner.

OMG! You guys! CIT totally had to borrow from emergency credit lines provided by (we’re told) three banks! Its shares and bonds promptly took a nosedive. The company found itself unable to borrow by issuing commercial paper after a ratings downgrade.

So wait! Dods this mean maybe the whole credit crunch thing isn’t over? But didn’t the President told us he’s an “optimistic fellow?” How can we still be in trouble? It’s too, too terrifying to think about. Let’s go back to thinking about how wonderful Barack Obama’s speech on race made all of us feel.

Related: CIT was founded 100 years ago this year.

CIT Taps $7.3 Billion of Bank Lines Amid ‘Disruption’ [Bloomberg]

Bear Stearns may have perfected the art of the blowup, but hedge funds invented it. Not only that, they gave birth to the very language we use to describe it.

Bailout. Blowup. Collapse. Hedge fund parlance is a ready made goldmine for describing the fate of Bear Stearns.

The collapse of Long Term Capital Management prompted a Wall Street bailout; Amaranth became the largest-ever hedge fund blowup when it lost $6.6 billion; the collapse of subprime mortgage marred hedge fund performance. Turning a discrete event in the financial market into an identifiable, memorable term like Black Monday or the Great Depression is impressive enough. But fleshing out a vocabulary perfectly suited to express the gamut of profit-and-loss within the financial market? That is a rhetorical achievement—and that achievement is the rightful domain of the hedge fund industry.

Bear and Hedge Funds, a Common Language [HedgeFund.net]

The Fed has massively cut rates over the last six months or so. The last time we had massive Fed easing, in the wake of 9/11, we wound up with the housing bubble. The time before that, when the Fed eased to pull us out of the recession of the early nineties, we wound up with the internet bubble.

So, of course, the natural question is where the next bubble will be. We’ve got strong inclinations to say energy, if only because the talk of rising global energy demand reminds us a bit too much of the talk of rising broadband demand we heard in the late nineties. Eventually the demand caught up with supply, but only after years of over-supply.

As long as we’re having video entertainment day at DealBreaker, we might as well put up this collection of “I want my two dollars” clips from Better Off Dead. (Thanks to commenter “36th Chamber” for the link.)

Jon Stewart on Bear Stearns, George Bush and Jim Cramer.

Don’t:

- Stick your tongue in someone’s ear during dinner

- Kiss like a St. Bernard

- “Act like a complete idiot”

- Have Asperger syndrome

- Be a Nazi

The Rank-Link Imbalance [NYT]

Harbinger Capital, run by Philip Falcone, was short Bear from last summer until Monday. Obviously, they just made a truckload of money, and obviously Falcone’s going to want to party. How convenient that he just bought the old Penthouse spread on 67th street, the perfect venue for a bacchanal like this. Everyone’s going to be there, including the Bear guys. Alan Schwartz will unfortunately not be able to attend, as he’s scheduled to give a repeat of his CNBC interview from last week, and he really can’t afford to pass up paying gigs. Jimmy Cayne will be brought out and roasted like a suckling pig, and even Charlie Gasparino will be making shameless use of his press pass to gain entry. The invite says “8 pm until ???” but Falcone’s old and will probably be kicking people out around 2. Luckily, Jamie Dimon has graciously offered to host after-hours at 383 Madison, noting on the e-vite, “I can do whatever the fuck I want with this place, I own this bitch. Piss on the walls for all I care. Just kidding, I do care, I told you that yesterday. But I really think the only way we’re going to make this “merger” work is by tearing this thing down and starting fresh so, I’m just say, if you have to relieve yourself, don’t let common decency stop you. All you’d be doing is what J to the Cay has been doing for the past 20 years.”

You’ve seen the company collapse, now get the t-shirt. Reuters reports that an entrepreneur has created a Bear Stearns collapse memorable t-shirt and put it up on Ebay. For just $17.99, you too can own a t-shirt reading “I invested my life savings in Bear Stearns and all I have left is this lousy T-shirt.”

Bear Stearns mementoes fetch more than shares [Reuters]

Some Traders Win Big (WSJ)
Well that’s pretty much a metaphysical reality: some trades win big. Though in this case its referring to a handful of funds that have profited handsomely from the Bear crash. We can only assume, then, that they were the instigators of all this. Not really, just fanning the flames. Among the names: Harbinger Capital Partners, Greenlight Capital, Tremblant Capital Group and Paulson & Co. Harbinger, of course, has been in the spotlight lately for its activist move against NYTCo. Paulson & Co. should not be confused with the new committee to save the world, which is sometimes referred to as Paulson and Co. That would be a conflict of interest.

True or False? Rumor Mill Puts Banks in a Tough Spot (WSJ)
Speaking of bear raids… the WSJ discusses the impact of rumor-mongering on some of these whipsawed financial firms. Apparently UK regulators, concerned about persistent rumors of bank failure, actually put out a statement admonishing people, saying they would investigate traders spreading false rumors. There are several interesting aspects to all of this, of course. There’s the whole notion of information cascades, and how quickly a bank or an institution can be crushed under the weight of one. And then there’s the question of passing on false rumors: well what if you really think its true? And what if its a self-fulfilling prophecy? Does that make it okay? It all goes back to the earlier discussion of trust-based business models, and an inherent frailty to them.

At Bear Stearns, Meet the New Boss (NYT)
JP Dimon went over to Bear yesterday to soothe the troops. He even trudged the rain, though we think this means walking into his care, getting whisked over, and then stepping out of his car (in the rain). The point: soothe the anger of executives who feel the company is getting a raw deal. There’s some good dialogue there that’s worth reading, as it underscores the drama (as if the drama of all this actually needed underscoring). The conclusion: it doesn’t sound like Dimon made many people happy. He promised to retain the best, but said there would be a lot of layoffs, as expected. And nothing he could say would make Bear go back to $60, so ultimately, he couldn’t say much to make them happy.

Starbucks Plans Return to Its Roots (NYT)
Starbucks CEO Howard Schulz is a bit like Ben Bernanke, quickly using up all of his bullets, as he tries to turn his coffee chain around. First it was the paring back on food to focus on coffee. And then there was the mid-day shutdown of the entire chain, so baristas could learn to reconnect with their craft. And now the company is launching a new quasi-social networking site, buying a coffee equipment company called Coffee Equipment Company and announcing a new espresso machine to be in all stores by 2010. Its all part of a plan to return to its roots — the glory days. Somehow, we suspect, that nothing in all this will be able to stem the fact that today there are Starbuckses everywhere, and 15 years ago there just weren’t.

Borders Group Announces Review of Strategic Alternatives and Financing Commitment from Pershing Square Capital Management; Reports Q4/Full Year 2007 Results
You’ve gotta love any press release that comes out at 1:30 AM. Borders Group, the bookstore chain, says it will suspend its dividend and search for strategic alternatives, including a possible sale. It also has commitments from Pershing Square to lend up to a specified amount of cash, as well as buy certain assets off of it. It warned that 2008 promised to be uncertain, in light of the economy, though as Steve Jobs says, nobody reads books anymore. So that part can’t help either.

$$$ More bigger intelligence [Going Private]

$$$ On Monday, Lewis called JPMorgan’s offer “derisory.” [NYP]

$$$ Entering With Erin [MM]

$$$ American Ecology Corp (ECOL) [WallStrip]

The investment firm run by chief John Meriwether lost 24 percent in its $1 billion fixed-income hedge fund this year through March 14, two people “with knowledge of the matter” have told Bloomberg. Meriwether, of course, was one of the big men behind Long-Term Capital Management LP, which collapsed in the late 1990s. LTCM lost almost $4 billion. Not even two years ago, Alternative Investment News gave him their Lifetime Achievement Award.

John Meriwether’s Bond Fund Loses 24% on Credit-Market Plunge [Bloomberg]

Well, it didn’t take long for the video of Eliot Spitzer’s call girl to turn up on the internet. Turn down the volume to avoid the annoying Associate Press voice-over.

You can watch a much larger, full screen version of the video at, where else, the New York Post. Just tilt your screen away from any management types.

Commodities slumped across the board today. Most market watchers are saying that aid for the mortgage markets encouraged some investors to move money from commodities to bonds. But commodities traders had more on their minds than bonds today, as rumors of additional margin requirements made their way across trading desks via instant messaging and phone lines.

What sparked concern was a rumor that the futures exchanges or regulators—or maybe both—were considering raising margin requirements for “non commercial” commodities traders—especially non-com energy traders. Non-commercial traders speculate on the price of commodities but do not ever take delivery of the commodities. Amaranth was a non-commercial trader, while Exxon-Mobil is a commercial trader.

The Commodity Futures Trading Commission, which is charged with overseeing trading in futures contracts, does not set margin requirements. This responsibility falls on the exchanges, such as NYMEX and the CME, which are viewed as having a better, ground-level view of the market’s volatility and risks. Spokespeople for the CFTC said they had no plans to begin regulating margin requirements.

A move to increase the margin requirements for non-com traders could be aimed at diminishing price-volatility, and might reduce commodity prices. This, in turn, might be viewed as aiding a faster recovery as investment dollars would be re-directed at areas of the economy that fuel growth. What’s more, it might tamper—or at least obscure—inflation fears by reducing prices in things like oil and gold.

The exchanges rarely distinguish between commercial and non-commercial traders, however. Market watchers DealBreaker contacted were skeptical that they would put in place such a distinction now. One economist also said that the move could actually fuel volatility, at least in the short term, by obscuring efficiency-creating arbitrage in the markets.

Has the bailout of Bear Stearn’s creditors created a precedent that implies a government guarantee for sophisticated investors doing business with investment banks? That’s what Nicole Gelinas argues in the editorial pages of the Wall Street Journal today.

[C]ounterparties on Bear’s derivatives and other creditors like Bear’s short-term financiers… should have known that they were taking on credit risk. Well, creditors are creditors; in a bankruptcy, they line up. What the Fed has done instead for these sophisticated investors is to offer them a rough approximation of FDIC insurance, even though they are not depositors and knew going in to the deals they had no such insurance.

For all the vague talk of “moral hazard” it’s nice to see Gelinas nail down one of the precise mechanisms. The Federal Reserve, with the help of JP Morgan, are rewarding lenders who extended financing to Bear Stearns and counter-parties who entered into complex derivative trades with the company despite—or perhaps out of ignorance of—the company’s shaky financial position. When you reward behavior, you get more of it. When you guarantee risk-taking, you get more risk. If Gelinas is right, the Fed’s intervention in the collapse of Bear Stearns may end up creating more risk rather than less in the financial markets.

The Bear Precedent [Wall Street Journal]

Bank of America’s chief executive Ken Lewis received $4.25 million in cash and $4.25 million in restricted stock for his 2007 bonus, less than half of his $18.5 million target. Know who else got screwed? Eliot Spitzer’s hooker, Kristen/Ashley. The intrepid entrepreneur was supposed to receive one million dollars to appear in a “non-nude” magazine spread and a “nude-nude” video clip for Girls Gone Wild, plus the possibility of joining the GGW tour bus. Founder Joe Francis took the money off the table when staffers informed him that after watching a few of their favorite DVDs over and over and over again, it’d come to their attention that they already had K/A’s ass on tape, so there was no need to cough up the cash (“It’ll save me a million bucks,” Francis told The AP. “It’s kind of like finding a winning lottery ticket in the cushions of your couch”). Luckily, Hustler publisher Larry Flynt’s offer of a mill. to get naked still stands, and Lewis is reportedly in talks with Honcho to make up his gipped scratch.

Spitzer call girl already gone ‘Wild’ [Yahoo]
Bank of America Proxy Statement [SEC]

Very exciting news for Warren Spector, the former Bear Stearns president who, in an awesome game of “I’m standing in a room full of crazy people,” got fired last August* for taking too many days off from work to play bridge, by Mr. Out of the Office himself, Jim Cayne. Following a change in the company’s deferred compensation plan in 2004, Spector apparently sold $382 million of his stock, and as of last March, only had a stake of about 0.06 percent, unlike Cayne, who owns about 5 percent of the company, and recently saw his munchies fund go from about $1 billion last year to $12 million today. But don’t go feeling sorry for Jimmy yet—he apparently outperformed Spector at a bridge tournament in Detroit over the weekend, coming in 65th place to Warren’s 146th. And as everyone who tried in vain get in contact with Cayne to discuss the small matter of an 85 year old company going to shit knows, that’s all that matters.

Earlier: There Can Only Be ONE Bear Stearns Executive Who Is Never At The Office!

As Bear Stearns Implodes, Spector Keeps $382 Million [Bloomberg]

*Excuse me, “encouraged to resign.”

This morning we learned that the government seems to have learned exactly the wrong lesson from the recent turmoil in the credit markets. Government policies to expand homeownership—remember the once-vaunted “ownership society” that President George Bush and his friends thought would make us all more responsible capitalists?—helped produce irresponsible mortgage lending, which fueled the massive build-up of securitized credit products, which unbalanced the balance sheets of our financial institutions, which…stop us if you’ve heard this one before.

Oh, right. Of course you have. Anyway, now the regulators in charge of mortgage lenders Fannie Mae and Freddie Mac have decided that what these institutions really need are less stable balance sheets and more leverage. And so they’ve decided to loosen key capital requirements that have been restraining the mortgage companies. Fannie Mae may now increase its leverage to 33-1 from about 30-1.

The move is being hailed by some as providing some additional government-backed cushion for the credit crisis. Which only confirms the fact that in the minds of many the solution to the problem of debit is always more credit. Well, looks like we’re going to get it, good and hard.

Official Statement from Office of Federal Housing Enterprise Oversight [OFHEO.gov]
Fannie, Freddie Surplus Capital Requirement Is Eased [Bloomberg]
Fannie and Freddie Get a Little Room to Breathe [Market Movers]

Bear Stearns shares have climbed down a bit from their near eight dollar highs earlier this week. (It still takes our breath away to talk about Bear Stearns at $8 highs. We remember not that long ago debating whether Bear was a bargain at $100.) But speculation continues over whether Bear Stearns shareholders could somehow reject the takeover bid from JP Morgan Chase. As we said earlier this week, the extraordinary lock-up provisions make this scenario extremely unlikely.

Yesterday we received an outrageous tip that Goldman Sachs would no longer be providing free soda and water to its employees. Exponentially more outrageous? The line we got not ten minutes ago: “That GS free soda story is bull shit. The only free stuff at the buildings I’ve been at (1NYP, 85 Broad, 180ML and 30 Hudson) is bad coffee and two kinds of milk to go with it.” I know, you can barely see straight. I’ll address our collective rage in two parts. Part one is: the minor matter of the fact that two kinds of milk fails to adequately address the needs of even your most low maintenance java drinkers—at the bare minimum there should be a choice of whole, skim, soy and half-and-half. Part two is: Lloyd Craig Blankfein, people, this is a disgrace! Goldman Sachs taking away freebies when times are tough and it’s not like employees can take a stand and get jobs elsewhere is one thing. Goldman Sachs never providing freebies in the first place is quite another. And don’t try telling me you don’t care because you do care, we all care. This changes everything and not in a good way. Feel free to retreat to your crying rooms at this time. I’ll let you know if and when we get evidence to the contrary, and it’s safe to come out.

So it seems some people are really getting bent out of shape over this whole thing about Bear Stearns CEO Alan Schwartz telling David Faber everything was cool at the firm just a few short days before everything wasn’t cool. No one wants to let this one go— it doesn’t help that the instigators at CNBC have been playing the clip ‘round the clock— or take a second to realize that we should be APPLAUDING Alan Schwartz, not tearing him down, or wondering if his comments about BSC “practically drowning in liquidity” were purposely misleading. As a Bear Stearns executive, CEO no less, the fact that the guy even showed up to answer questions about the solvency of his own company is huge. Factor in that he was at the Breakers Resort in Palm Beach at the time, and had to actually get out of the pool and towel off, walk up to the lobby and ask someone to hold his drink while he “did a thing,” and I think you will agree with me that someone should be getting a raise. Obviously, some of you don’t see it this way. The SEC includes itself in this group of one-dimensional thinkers. Since it doesn’t look like they’ll be backing down from their little threat to investigate why Alan Schwartz said what he said, let’s just get to the bottom of it now, and move on with our lives.

d. should be “got too much sun.” Vizu doesn’t let you just click back, you have to start all over, would’ve taken a decade, etc etc etc.

S.E.C. Eyes Bear Stearns’ Comments [DealBook]

It’s well known that many Bear Stearns shareholders are not too happy that they may be asked to bear at least some portion of the cost of rescuing the financial markets from aftershocks of a Bear Stearns bankruptcy. Many believe they’d fare better in bankruptcy. Politicians are also lining up to take advantage of the government’s role in the rescue-through-buyout plan, calling for greater regulation. But it’s not just shareholders and politicians. Outrage over what is widely seen as a bailout is spreading to the broader public, including girls obsessed with celebrities, sex and fashion.

Over at Jezebel, Moe Tkacik has penned an impassion plea for Ben Bernanke to stop aiding Wall Street. It’s rather long on passion and short on analysis but it gets one thing right: there’s a great irony that our the masters of financial system, which has been shucking off regulations for years, have suddenly discovered the need for close government supervision because of the fragility of finance.

Anyway, here’s Moe, who writes in prose that would make even Bess Levin blush:

So fuck the Street, Ben Bernanke; just this once, just for, like, a quarter or something. You don’t have to play rough; I’m not asking you to nationalize any industries or institute land reform or anything, just give them a little scare. They chose this path, you know. They chose to worship Ayn Rand and wear those Paul Smith shirts and pay zero money down on their Hamptons summer homes and obnoxiously, whenever confronted by someone like myself at a bar, claim that the Market Solves Everything. Let the market solve this one for them. People are eating dirt for dinner in Haiti, Ben Bernanke; you can let Bear Stearns go to bankruptcy court.

Dear Ben: Really, Next Time, F*** Wall Street. [Jezebel]

There’s no doubt panic has set in at Bear Stearns. Even before the deal was announced, Bear employees who had retreated to nearby Connolly’s Pub were comparing notes on what to do next. But the worry has spread beyond actual employees at Bear Stearns. Summer interns are starting to show concern now that they’ve realized the bank that hired them may very well pass from the earth.

Mergers & Inquisitions, a blog offering job advice for investment bankers, has produced a four point plan on what to do if you are worried about your summer internship at Bear Stearns. The advice includes not calling Bear Stearns. Nobody there knows anything anyway, and if they do they’re probably too busy to deal with your problem. But M&I does recommend seeking out alternative positions. Uncertainty about the future here is just to high. Engage in some personal risk management and hedge this bet.

Bear Stearns Episode 2: The Shareholders Strike Back [Mergers & Inquisitions]

NYC to probe if Bear Stearns deceived investors (Reuters)
They probably have to. Before we waste too much breath on this one, wondering what a NYC investigation into Bear Stearns’ final days is going to yield, we probably just have to acknowledged that it’s inevitable. Now if they try to make a whole lot of nothing, when we can jump up and down or whatnot. Also, the SEC has said it won’t rule out an investigation. But again, why would they rule one out so early?

Bear’s Run-Up Sets the Stage For Epic Clash (WSJ)
On the matter of the run-up in BSC stock, WSJ is predicting an epic clash, with shareholders set to reject the $2 deal. Of course, this view goes against the trendy explanation that BSC counterparties are buying the shares so they can vote in favor of the deal, knowing that the haircut they take on the common stock will be worthwhile to have their other assets insured. We’re not 100 percent convinced by that, but it does make some sense, given that even at $4 or $6 or $8, BSC is pretty cheap compared to the other BSC-related assets out there. That being said: if shareholders were to oppose the deal, it would be tantamount to sedition. Seriously, we’re already in uncharted territory, but we’d go deeper into the depths if shareholders thumbed their nose at the Fed. What combination of asset prices can we use to measure the odds of a deal happening at this point?

Asian Stocks Advance Most in Month on Fed Rate Cut, Earnings (Bloomberg)
Between the rate cuts and the bank earnings and good reports from China Mobile and Alibaba, Asian stocks finally turned in a good evening. The Nikkei started to claw back from its harrowing losses, rising 2.5 percent, while the broader Asia-Pacific index was up 2.6 percent. In Australia, Macquarie rose 7.6 percent.

BNP rules out bid for Societe Generale (AFP)
Just so you know, BNP is not going to bid for SocGen. There had been some speculation of a deal, but with SocGen having raised money and BNP not seeing any shareholder value in doing the deal, there appears to be little impetus.

$$$ Synergy [Vanity Fair]

$$$ The Mystery of the Bear Stearns Stock Price [DealBook]

$$$ Damn All You People Who Contribute To Market Randomness! [Tim Sykes]

To: tips at dealbreaker dot com

From: redacted

Subject: DealBreaker Tip

Goldman just cut free water/soda for employees.

Update: Goldman has something to say: “We’re not tanking, we’re conserving. Do you see the distinction?” Regardless of their spin you know the alternative is work at Bear Stearns. You want to keep your job? Let me introduce you to Mr. Tap, and his friend, Senor You can afford to pay for your own Coke.

So the Federal Reserve decided to defy market expectations and the predictions of most Wall Street economists that it would cut 100 basis points from the Fed Funds target rate and delivered only a 75 basis point cut. Economists for Citigroup, Morgan Stanley, Goldman Sachs, Standard & Poors and Bear Stearns all called it wrong.

DealBreaker’s readers did better. The chances of a 75 basis point cut ran neck and neck with the chances of a 100 basis point cut for most the morning and early afternoon. As the Fed announcement approached, however, the votes for a 75 basis point cut pulled ahead. Thirty-nine percent of readers voting in the poll favored 75 basis points, and 34.% favored 100 basis points. Joseph LaVorgna, chief U.S. economist at Deutsche Bank, also called it right by predicting a 75 basis point cut.

The market then also defied almost everyone’s staging a tremendous rally after the news broke. Goldman Sachs had warned that “anything less than the almost [one percentage point] that is now discounted will risk an adverse market response that could aggravate the fragility Fed officials are trying to repair.” Well, at least in terms of the immediate market reaction, that prediction seems dead-wrong.

Why the rally? We don’t like to offer explanations for movements of broad stock market indexes. But we do think the Fed statement probably reassured many investors by re-iterating the Fed’s awareness that the economy is in peril and repeating its new mantra about being prepared to take further action should things deteriorate. What’s more, there was something comforting in the display of a Federal Reserve confident enough to defy the clamoring of the Punch Bowl Caucus. From a Fed that has lately seemed to only ask “how high” whenever Wall Street has said “jump,” those 25 points of defiance are a welcome sign of independent judgment.

A lot of you think the end is nigh. You think there’s no way out. You think JPMorgan is going to replace all of Bear Stearns with this huge bug, and that’s going to be the end of it. And you think the guy who should be saving and holding and stroking us all, Ben Bernanke, doesn’t have a clue as how he can make things better, and spare us from BugBot. Well, we’ve got news for you, sisters—Ben Bernanke knows exactly how to get us out of this techno-arachnid mess, and we know he does because his thesis adviser from grad school, whose reputation is not at all at stake, said so.

Bank of Israel Governor Stanley Fischer, who mentored Bernanke on his doctoral thesis, entitled ‘Long-term commitments, dynamic optimization and the business cycle; Or, how to protect Wall Street from flesh-eating BugBots,’ at MIT, told Bloomberg, “You can inject liquidity in the economy and it happens that Ben Bernanke is an expert on the issue.” Not worried about coming off as biased, he added: “Ben Bernanke is an outstanding economist— this should come as a shock to exactly no one aware of the fact that he is a student of mine. You read that correctly— ‘is,’ not ‘was,’ ‘is.’ Yeah. YEAH. He runs everything by me and I have to sign off on it all. I am, as they say, running this b’yatch. And I don’t just do the economic stuff. I do it all. ‘Member that photo shoot with the Times? My idea. The soft lighting? Mine. The hand pensively stroking the jaw? You guessed it— mine.”

Bernanke to Get on Top of Credit Squeeze, Says Israel’s Fischer [Bloomberg]

Gather ‘round everyone and listen close because I’m only going to say this once— yes, it’s really quite a tragedy what’s going on over at Bear Stearns. Yes, a lot of people are going to get canned, and yes, there won’t be enough summer internships to go around and yes, dollars to donuts, Jimmy Cayne’s got a few bad highs coming his way. But let’s get a little perspective: few, if any of you are receiving sub-par lap dances. You should count your lucky stars; Stephen Chang didn’t have such good fortune. According to a lawsuit filed in Manhattan yesterday afternoon, the securities trader claims he was injured when a stripper doing her thang swiveled too closely, and smacked him in the face with the heel of her shoe. This all happened back in November at the Hot Lap Dance Club, which is a great name for a business and one I’ll be stealing for the hedge fund I plan on starting within the next five years (Hot Lap Dance Club Capital). Unfortunately, the attorney representing the injured party declined to disclose the name of the brokerage fund where the victim works, and there are about a billion Stephen Changs listed on Bloomberg. Ball’s in your court.

NYC Trader Files Lawsuit Claiming Lap Dance Injury [AP]

One thing that was clear to everyone involved in the deal for JP Morgan Chase to take over Bear Stearns was that there would be lots of litigation. The unusual features of the deal—including JP Morgan’s option to buy the Bear Stearns headquarters even if the deal doesn’t close, the non-solicitation clause, and the option for JP Morgan to purchase 20% of Bear’s shares—amount to an extraordinarily firm lock-up, and the JP Morgan deal team wasn’t shy about mentioning their deal protection on Sunday night’s conference call.

It took less than a day for the first shareholder lawsuit over the collapse of Bear Stearns to be filed in federal court in New York. Coughlin Stoia Geller Rudman Robbins, a San Diego-based law firm, filed a suit yesterday alleging that Bear Stearns and its leaders made false statements about the firm’s financial condition and failed to disclose information investors needed to know to evaluate the company’s value, the New York Sun reports. The suit seeks certification for a class action on behalf of investors who bought Bear Stearns common stock between December 14, 2006, and March 14, 2008. James Cayne, Alan Schwartz, Warren Spector, Samuel Molinaro, and the chairman of the executive committee, Alan Greenberg are all named as defendants.

As Ted Frank points out on the Point of Law blog, one irony of the shareholder lawsuits is that the expectation of them wound up reducing the payout to Bear Stearns shareholders. “One of the reasons shareholders are getting so little is because of the billions of dollars of litigation reserves JP Morgan has built into the valuation,” he writes. The lawsuits are expected to generate hundreds of millions in litigation costs, and—very possibly—the litigation costs could actually exceed the purchase price JP Morgan plans to pay for the company.

Bear Stearns thoughts [Point of Law]
Amid Bear Stearns Rubble, Lawyers Swoop In [New York Sun]

Larry Ribstein, who writes on Ideoblog, asks:
Is there potential [Sarbanes-Oxley] internal controls liability for Bear executives? If not, and melt-downs like this can happen after SOX (worth $80+/share one day, $2 the next), then what was it, exactly, that SOX did for us? Could it be that SOX didn’t eliminate risk after all? … So two possible lessons from Bear: We didn’t need SOX, and it didn’t do any good.

Lessons from Bear on SOX [Ideoblog]

No one, not even the hopeful summer analysts, who really need these jobs, will be spared.

THE LAYOFFS AT BEAR HAVE BEGUN! I’m actually a sophomore who was planning to intern at Bear Stearns this summer. I called the guy I had interviewed with originally this afternoon. He said he was busy, so I agreed to call back after 4:30. At 5 pm, I call, and some other guy picks up and says, “He no longer works here”. There you have it…the massacre begins.

Goldman Sachs, which announced this morning that it made $1.5 billion last quarter, has quietly been telling some employees to prepare for another round of layoffs. The job cuts are scheduled for mid-April, and will include some senior positions which have not been large cash generators, according to a person familiar with the matter. Goldman, which has weathered the storm of the credit crunch better than many competitors, has not had anywhere near the level of job cuts that rival firms, such as Lehman Brothers, have had.

Goldman Sachs was not asked to confirm this report.

The Week That Shook Wall Street: Inside the Demise of Bear Stearns (WSJ)
They’re still talking about this one? Not that you need yet another “must-read” account of the Bear Stearns collapse, but this may be the closest thing we have to a definitive history right now. From Tuesday through Sunday, the rapid final days before the sale. Definitely a must-read.

Northern Rock to axe a third of staff (Telegraph)
Some layoffs news from across the pond: Northern Rock will lay off over a third of its staff, perhaps up to 2500 of its 6,000 employees. The layoffs come as part of the nationalized bank’s attempts to reorganizes its business and head back into the world. Other aspects of the plan: selling assets and luring retail depositors back.

Bush Supports Fed’s Actions, but Critics Quickly Find Fault (NYT)
It seems like some folks are getting tripped up over language. The term Bear Stearns bailout has really got to go. Yes, the Fed engaged in some sort of bailout. And yes Bear Stearns was involved. It doesn’t mean the Fed bailed out Bear Stearns, as evidenced by, say this stock chart. Why does it matter? Because the perception is that the government stepped into to protect its investment bank cronies while leaving millions of Americans on the hook for their debts. Then again, politicians will always use anything to say anything, so why be surprised.

Gov. Paterson admits to sex with other woman for years (Daily News)
For several hours last night, Drudge was running a teaser about a paper getting set to release a ‘political bombshell’. Then the word was that it was the Daily News and our hearts sank a little. And then it we saw the headline and got excited — the new gov? An affair? Already? But it’s not really so great. It’s old and his wife already knew about it. It was during a difficult time and even she had an affair. So, good they’re getting it out there. Not really a scandal. Oh and no sex-for-money, which pretty much undercuts any commerce angle we might’ve found.

Bernanke May Cut Benchmark Rate by Most Since Volcker (Bloomberg)
Oh right: Fed meeting today. So, who says we’re going to get the big 1-point-0? Anyone? Let’s say we do, what then? Might just be a sell the news. As we mentioned yesterday, the last thing we need is confirmation that the Fed will do anything to save the ship. That we’ve known forever. Might be more reassuring to know that the Fed has some cojones.

Court frees SocGen trader Kerviel pending probe (Reuters)
This is ridiculous. Pending an investigation, Jerome Kerviel has been freed. We are outraged by this negligence. As long as men like Kerviel are free to roam the streets, our financial system is insecure. What’s stopping him from trading away another $7.1 billion just like that? Nothing. Only behind bars, without access to a trading terminal, can we rest easy again. Unfortunately, he’s not in America, so we doubt that Bill O’Reilly could browbeat the judge into putting him back where he belongs.

$$$ Deals: A Topsy-Turvy World
In our M&A Roundup for the week ended March 16, tender offer for the maker of “Grand Theft Auto” and purchase of a social networking firm rank near top — while Bear Stearns goes for two bucks a share. [CFO.com]

$$$ CME completes $9.4bn Nymex deal [FT]

$$$ The Evolution of Portfolio’s Covers [Gawker]

$$$ Coldwell Banker broker Ray Schmitz, the guy who was standing outside Bear Stearns’ headquarters hawking apartments for any BS employees now looking to downgrade. [Curbed]

$$$ New Trial for Ex-Qwest Boss Nacchio [AP]

$$$ KKR: “We do not have any risk from U.S. home loan assets.” [FINalternatives]

Our item on Lehman has provoked sadness and not a little outrage by some of our readers who are both Lehman employees and investors. We’re accused of simply buying into the rumor fueled fire that is burning down Lehman brother’s share price today. In fact, at least one person familiar with the firm suspects a conspiracy behind the fall of Lehman’s shares today.

“Of course, LEH is again tanking today, and the most ominous rumor I’ve heard has to do with Goldman trying to break us while they have the chance (like they did to Bear),” one Lehman investor said on the condition of anonymity. “The resulting fire-sale would be an even higher quality corporate liquidation bargain than Bear Stearns’ portfolio, which was legitimately stinking up the joint. I can see how that would greatly benefit the big firms, even if it is vile.”

He adds that Lehman should have plenty of money so long as counterparties and investors don’t panic.

“The Fed says we have $200 billion of credit if we need it (with the ability to pledge the ‘worthless’ securities as collateral if we’d like). Fuld is absolutely right, liquidity should be off the table,” he says. “But even if we can let everyone cash out successfully, we still need customers! Short of publishing the firm’s complete balance sheet, how could any company manage the market’s insistence on jumping a perfectly sound and well-sailing ship?”

We contacted the DealBreaker energy trading desk this afternoon for a report on the state of the market, but the celtic tigers who are supposed to watch that market for us were already out getting drunk for Saint Patrick’s Day.

We rifled through the desk anyway, and came up with a few notes on what we think was supposed to be a report on the state of the market today. “Still haunted by the sudden loss of liquidity when Enron collpased, the nation’s energy markets remained stable with normal volumes Monday but traders admitted they are waiting for bad news from the financial sector which rescued it post-Enron,” the note said. At least that’s what we think it said. It was hard to tell because the page was stained with beer.

When we checked the screens we saw that April NYMEX gas futures contract had dropped like a rock. We called up and asked about it.

“Is this related to Bear Stearns? Is it because they’re selling off their energy portfolio?” we shouted trying to make ourselves heard above the din of the midtown dive.

“Get a life Carney. Not everything that happens today has to be because of Bear Stearns! Nobody thinks the price drops are related to BSC. When are you coming out and getting drunk?” our covert energy reporter said.

Soon, we answered. But the phone had already gone dead. And then we decided we’d attach a Bear Stearns tag to this post anyway.