Opening Bell: 3.24.08

Posted by guest, Mar 24, 2008 7:51AM

I think its a good thing, guys continue to get paid here until they decide whom to keep and not, then when they get their ducks in a row help placing teams out like what happened at Amaranth

Posted by Random Banker, Mar 24, 2008 7:57AM

@7:43

its clearly fucked up for Dimon to be doing that, especially given his comments to Bear's SMDs last week. Its a dick move, but then this is ibanking after all. I'm sure John's Mack & Thain told Jamie to go fuck himself.

Mean while the BSC shareholder have Jamie over a barrel given that he's given them a blank check to trade with that clause about financing all of Bear's trades regardless of whether the deal was approved. Bear's shareholders have no incentive to approve this deal. Now if Bear's management would grow a sack and kick JPM's spies out of the building they could swing for the fences on Jamie's dime and maybe save their shop. At least invite Wachovia or someone in for a rival bid.

Posted by AJ, Mar 24, 2008 8:03AM

Why the hell was this buried in one of the last paragraphs:

"One sentence was “inadvertently included,” according to a person briefed on the talks, which requires JPMorgan to guarantee Bear’s trades even if shareholders voted down the deal. That provision could allow Bear’s shareholders to seek a higher bid while still forcing JPMorgan to honor its guarantee, these people said."

Wow...

Posted by guest, Mar 24, 2008 8:09AM

Eff that JPM would back out of that "guaranty" the second it feels the knives coming out at bear

Posted by guest, Mar 24, 2008 8:10AM

Haha, JPM taking one for the team there, and the other CEOs could care less just wanna pick over the carcass, Lehman wouldnt even be in business right now if Dimon didnt step up

Posted by Random Banker, Mar 24, 2008 8:11AM

(reposting from earlier)
Well Andrew Ross Sorkin now officially owns the WSJ, they still don't have this story.

Also I knew that clause about financing all of Bear's trades regardless of whether the deal was approved gave Bear's shareholder's no incentive to approve this deal. Now allegedly this is being called a "mistake" by the Times. One cannot fathom how that could be possible. Anyway, there's even less incentive to accept the deal now that the "mistake" has been brought to light. Another bank should step in just to fuck JPM, BSC has JPM's balls in a vise.

Also, who the fucked negotiated this thing? Steve Black? He should be fired.

Posted by Investorcluzo, Mar 24, 2008 8:35AM

@aj: agreed, that should be the headline, it's the only reason the deal has to be altered!

"apoplectic" doesn't begin to describe how jamie d felt after uncovering the “inadvertent” language (someone is going to get fired). c’mon now, we know that the fine lawyers on the transaction used some boiler plate language. as a result jpm has no choice but to renegotiate. instead of raising his bid to $5, he now has to go up to $10 or maybe even more. the only thing saving the boys and girls at 277 park is the good ol’ fed who are frowning on a much larger price. hooray for the shareholders, shame on the lawyers (someone was asleep at the switch)…wsj just picked up the story.

Posted by ab, Mar 24, 2008 8:42AM

Since the deal still hasn't been approved, are they actually required to finance BSC's trades? Seems to me that they could just back out if they feel like the shareholders are going to reject. Or has there been some legal contract signed?

Posted by Random Banker, Mar 24, 2008 8:47AM

@ic:

The "inadvertent" clause was openly discussed on the call last Sunday. "Mistake" my ass. They knew exactly what they signed up to and did it the heat of the moment assuming BSC's share holders would go along. The thing they didn't take into account was that as soon as they signed up to the deal BSC shareholder's no longer have any incentive to approve it because the run on the bank had been averted.

Posted by guest, Mar 24, 2008 8:51AM

I love the nerve of these Bear losers. They screw up their firm beyond reproach and start pointing the finger at everyone else. They should have stuck with clearing, instead of letting Nicky and Bobby start trading mortgages. PLace is a joke

Posted by guest, Mar 24, 2008 8:58AM

this hit job wasn't well thought out.

without getting wordy and verbose, the fed tried to protect counter parties and the general financial system by figuratively executing bear stearns.

in order to execute bear, they had to provide free insurance to the only bank which could absorb bear leftovers.

instead of shooting bear stearns in the head and making it quick, it's like a death of a thousand cuts, which now leaves bear shareholders feeling like they have something valuable while jpm goes through the pockets of bsc like a street thug.

lol

this entire fiasco is a culsterfuck to the nth degree.

Posted by guest, Mar 24, 2008 9:04AM

this what happens when the us government chokes and acts like some banana republic issuing fiats...rememberthe secondary market created by James Baker for 3rd world debt back in the 80's. buessing yes, interesting stuff.

the best solution to this nonsense is for the us federal government to do a DUTCH AUCTION for all mortgage debt right now. set it up in tiers - 20 cents per dollar for X, 40 cents per dollar for Y, etc. sell now you pussies or shut the fuck up. these greedy stupid assholes created this mess, and then they cry in their spoiled milk.

if these scared little assholes really want to get rid of this crap they own, they'll sell. this will stabilize the market and more than likely cause prices to go higher.

the only reason this crap is worth so little is because of fear. everyone wants to sell and nobody wants to buy. that creates a vacuum and drives prices of hard assets to zero (underlying asset), which is fucking stupid, but nobody smart works on wall street so that makes sense.

btw - sold jpm friday MOC. weeeeeeeeeeee~!

Posted by guest, Mar 24, 2008 9:07AM

Its their own fault, plain and simple. I do have a slight issue with the Fed getting so involved, especially when they are throwing our cash around. We are all going to pay due to the recklessness of a few indivisuals(Weill, Mozilo,O'neal,Fuld) etc. These self styled masters of the universe are going to crush Manhattans ecomnomy before all is said and done. Notice how I didnt mention the BSC boys in there. Sam Molinaro shouldnt be running hedge funds, he should be running card games in Queens

Posted by guest, Mar 24, 2008 9:14AM

No way was that a drafting mistake. Guarantee docs were sent out from JMP last Monday morning to everyone on a BS trade and there was no contingency about the deal not going through.

Gotta love how Dimon tried to blame his lawyers once he realized he'd left the door open on this point.

Posted by Anal_yst, Mar 24, 2008 9:28AM

I don't wanna beat a dead horse here since everyone's mentioned this already, but there is no way Dimon can try to pawn this off as a mistake, per ARS' article. Go back to the call, and the db discussion of the call everyone knew about this guarantee, and they (JPM) explicitely clarified its precise meaning.

This smells of something not-quite-right, as there is no possible way, even in the tremendous haste to get this done over the weekend, that JPM could have been so stupid, so shortsighted. I wouldn't be surprised if JPM comes out looking not like the idiot they currently appear to be, but as if this was the plan all along. Either that, or heads are going to roll ha.

Posted by guest, Mar 24, 2008 9:49AM

I picked up on this story yesterday midnight due to the thoughtfulness of a DB commenter. Thanks again to whoever it was that posted!

The one thing that seems to stand out to me is that the Fed forced the transfer of a great deal of wealth last weekend in an extremely compressed period of time.

The Fed doesn't have to live with the business consequences of too harsh a deal being forced on Bear, JP Morgan does. The Fed is not being asked to put up more money; they are being asked to stand pat. JP Morgan is the one putting up the increased money, and after a week of turmoil, watching the open revolt of Bear Stearns' employees, JP Morgan decided it's worth their money to sweeten the deal. A hardball JP Morgan attitude is only going to destroy the value of the Bear franchise, and JP Morgan has realized it.

The Fed isn't losing any money on this deal (so far) and probably won't lose money when the dust settles. What the Fed is worried about is losing face, and having to explain the whole mess to political bosses in Washington, and to a public who believes Bear Stearns executives have some fabulous payoff arranged for themselves coming out of this.

Just at the end of last week, Bernanke was basking in his success. Well, sir, I think it's time to commit yourself to working a little harder. Why don't you try to explain the facts to your bosses and to the public, instead of trying to strongarm shareholders to give up the additional scraps JP Morgan is offering?

As to the legal "mistake," it's hard to point fingers. JP Morgan's lawyers loaded the deal with so many lock-up provisions that they got a public compliment from the NY Times "Deal Professor;" apparently someone along the way asked the question about how the deal would work if the shareholders voted it down, and the chink in JP Morgan's armor was exposed. Just like the Feds drove JP Morgan to make too hard a deal, the JP Morgan lawyers were too clever by half. If the deal had been fair and both parties wanted it to work, problems in the lawyerly wording of the deal could be worked out. But the deal is onerously one-sided, and every advantage is going to be exploited by the underdog.

Posted by guest, Mar 24, 2008 10:20AM

Classic line about Bear trading floor or shall we call it The Cayne Mutiny?

"A few try to work but seem absurd for doing so, like the Japanese soldiers they found on those islands in the '60s, still fighting the war in the Pacific."

-Slate

Posted by guest, Mar 24, 2008 10:38AM

Wall Street Firms Cut 34,000 Jobs, Most Since 2001 Dot-Com Bust

By Yalman Onaran

March 24 (Bloomberg) -- Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.

Citigroup Inc., Lehman Brothers Holdings Inc. and Morgan Stanley are among the firms that have disclosed headcount reductions so far. After the Internet bubble burst, 39,800 jobs were eliminated during the same period; the number climbed to 90,000 in the next two years, according to the Securities Industry and Financial Markets Association.

The collapse of the subprime mortgage market last year and the ensuing credit contraction have saddled the world's largest financial institutions with at least $200 billion of writedowns and losses. Bear Stearns Cos., once the fifth-biggest U.S. securities firm, became the emblem of panic on Wall Street two weeks ago, when it was forced to submit to an emergency takeover backed by the Federal Reserve as clients and lenders deserted the company. More bank losses are likely, according to analysts.

``This crisis is much worse than 2001 and we don't know how long it's going to last,'' said Jo Bennett, a partner at executive search firm Battalia Winston International in New York. Job cuts ``could be more than 100,000 in a few years.''

Securities firms started eliminating positions in mortgage departments as early as last July, when rising delinquencies on home loans to borrowers with poor credit histories led to a decline in the prices of bonds tied to the loans. Between July and December, almost 17,000 jobs were lost, according to data compiled by Bloomberg.

Shuttered Lenders

Lehman's home-loan unit, BNC Mortgage LLC, employed 1,600 people before the firm closed it down in August. Mortgage lender First Franklin Financial had 2,300 employees when it was acquired by Merrill Lynch & Co. in January 2007. Merrill shuttered the business this month. All told, at least 100 mortgage companies have suspended operations, closed or been sold since the start of 2007.

This year, banks including Lehman, Citigroup and Morgan Stanley have been winnowing out employees in fixed income trading, securitization, asset management and investment banking. Administrative and technology staff have also been let go. So far, Citigroup has eliminated 1.7 percent of its workforce, while Lehman has chopped 18 percent. Morgan Stanley has cut 6.2 percent, and Merrill has eliminated 4.5 percent.

The bursting of what Glenn Reynolds of CreditSights Inc. has called the ``securitization bubble'' is affecting other industries. Lawyers who helped create mortgage-backed bonds, realtors who sold more houses as home ownership in the U.S. rose and mortgage brokers who found new customers as lending standards were relaxed are now looking for work, according to Jeanne Branthover, a managing director at Boyden Global Executive Search in New York.

Black Cars

``This is filtering down to the vendor,'' Branthover said. ``The firms Wall Street was using are also feeling the pain.''

Even the black cars that shuttle bankers and traders home from their Manhattan offices are seeing demand for their services dwindle, and the firms may have to fire some drivers, said Battalia Winston's Bennett.

Bear Stearns, once the biggest U.S. underwriter of mortgage securities, agreed to be acquired by JPMorgan Chase & Co. on March 16 after a run on the securities firm left it facing potential bankruptcy. While JPMorgan hasn't said how many Bear Stearns employees may lose their jobs, half of the 14,000 people at the company may be let go, estimates Boyden's Branthover. The two firms have overlapping businesses and JPMorgan, the third-largest U.S. bank by assets, may shut down some Bear Stearns units, she said.

Fed Action

Revenue for Wall Street brokers may decline as much as 30 percent this year, Standard & Poor's said March 21, when it cut the outlook for credit ratings at Lehman and Goldman Sachs Group Inc., the biggest U.S. securities firm. While the Federal Reserve's March 16 decision to open a lending facility for brokers may ease cash concerns, ``persisting market turmoil'' may still erode brokers' earnings, S&P said.

Goldman said in January that it may fire 1,500 people to weed out underperformers. On March 18, Chief Financial Officer David Viniar said headcount was unchanged during the first quarter and might grow in the ``low to mid-single digits'' this year, mostly because of hiring outside the U.S.

Some firms haven't fully disclosed their job cuts because they don't want to appear financially weak, according to Battalia Winston's Bennett. ``They're all dribbling people out the door, so the numbers don't show the true extent of the problem yet,'' said Bennett.

Ousted CEOs

Merrill, which didn't announce job reductions last year, said on March 5 that 70 percent of the staff at its First Franklin mortgage unit had been eliminated since July. Merrill is a passive, minority investor in Bloomberg LP, parent of Bloomberg News.

Senior Wall Street executives haven't escaped unscathed. Six chief executive officers, eight presidents or other officers and at least 19 division heads have lost their jobs as a result of the subprime meltdown. Citigroup CEO Charles O. ``Chuck'' Prince, Merrill CEO Stan O'Neal, Bear Stearns CEO James ``Jimmy'' Cayne and UBS AG CEO Peter Wuffli were the highest- ranking casualties.

Compared with the fallout after public markets slammed shut on speculative Internet companies in 2001, more high-level Wall Street executives are losing jobs in the current crisis, according to Gustavo Dolfino, president of New York-based executive search firm Whiterock Group LLC. When the dot-com boom ended, the people who lost jobs were predominantly rank and file, he said.

Human Capital

``Clearly there's a trend to make people pay,'' Dolfino said. ``Firms have also been moving lower-ranked staff from the U.S. to Asia, where they need more hands. Top people don't want to move as easily.''

Boyden's Branthover said she doesn't expect this cycle of job cuts to reach post-2001 levels. One of the lessons the firms learned from that period is that it's costly and difficult to replace human capital lost during times of distress, she said.

``A lot of support staff will be cut because those are easier to replace when the business turns around,'' she said.

The following table shows jobs eliminated by the biggest banks and securities firms since the collapse of the subprime mortgage market in July 2007. The figures are based on company disclosures.

Firm Positions Cut

Citigroup 6,200

Lehman Brothers 4,990

Bank of America 3,650

Morgan Stanley 2,940

Washington Mutual 2,600

Merrill Lynch 2,220

HSBC 1,650

Bear Stearns 1,550

WestLB 1,530

UBS 1,500

Goldman Sachs 1,500*

National City 900

Credit Suisse 820

Royal Bank of Canada 500

Fortis 500

Wells Fargo 500

Wachovia 443

Deutsche Bank 370

JPMorgan Chase 100
_____
TOTAL 34,463

Posted by guest, Mar 24, 2008 12:13PM

Who cares about BSC, Dimon or distressed mortgage paper; didn't you hear, "God hit $906 per ounce"!

What an auspicious occasion to own the alleged Creator!