WHEN PEOPLE CONFRONT BANKERS: Inside Bear Stearns

FORECLOSURE VICTIMS INVADE BEAR STEARNS HQ, PICKET JP MORGAN
CITIBANK SETTLES ENRON SUIT FOR MORE THAN A $BILLION
PENTAGON SHARES WAR WORRIES WITH THEIR “DECIDER”
By News Dissector

Now I can confirm that this blog is not being studied by intelligence agencies (possibly only by some hostile readers who can diagnose my various mental maladies, smile!) If the NYPD, for example and its billion dollar spy shop, had been reading yesterday, they would have a) maybe learned something and b) found out that a protest against the predatory lenders at the now nearly defunct firm Bear Stearns was going to take place yesterday,

To my surprise, there was not a cop in sight as several hundred interracial and feisty members of NACA, the Neighborhood Assistance Corporation of America, some facing foreclosure, marched without a permit from St Bartholomew’s Church, next door to the posh Waldorf Astoria Hotel down Park Avenue, past the bank’s entangled kith and kin at USB and Deutsche Bank and then JP Morgan Chase, right into the unguarded lobby of the company at the epicenter of the Wall Street crisis, the one with the appropriate initials BS, all the while chanting, “Help Main Street, Not Wall Street.”

There were mothers with children, Latinos, blacks, whites, one of whom was a former professional boxer. All wore yellow T-SHIRTS with a shark on it and the slogan Stop Loan Sharks. These folks were militant but in a good mood, chanting as they marched around the lobby with the work force, traders and executives, in nice suits and white shirts looking on with amazement. In effect, the “invaders” held them hostage….everyone was frozen in place. Their security people freaked out. There was no exec willing to speak to the folks from NACA. Efforts to contact the head of JP Morgan went nowhere. The receptionists would not call upstairs for the protesters. One woman held a sign that said: “HEAR OUR CRIES.” You had the sense that no one there wanted to hear them. I tried to talk to the fearless moneymakers in the lobby but all I got was “no comment.” No big surprise. When they were living large, there was gloating. Now, silence.

These were the faces of the people they never saw as they bought up their mortgages only to securitize, slice and diced them and then sell them worldwide in bundles of assetless assets. They made a fortune on these very people in their glory days but that’s over now. Only the Federal Reserve Bank’s possibly illegal intervention saved them, at least until the pink slips start flying. 20,000 people may still lose their jobs.

The one time “masters of the universe” looked at these folks in “their” lobby as people from another planet—but clearly the members of NACA connected the Bank’s affluence to their own pain. That’s why so many got up at 5 AM in Baltimore and Boston and Springfield MA to come to town to speak on behalf of all homeowners on the edge of eviction because of fraudulent sub-crime scams.

Bruce Marks of NACA said afterwards that many of the employees at Bear Stearns took it personally when their building was invaded , but so do the homeowners. He said that NACA’s campaign against predators is just starting and that they will take the fight into the faces of other bankers and even their children so they know what their parents do. He was tough, clearly an adept guerilla fighter because, tactically he took the enemy by surprise. He used bullhorns against the billionaires at BS.

And, then when the police did arrive, he and his troops left to fight another day with no arrests and no compromise.

As word spread in the city’s newsrooms, perhaps because Bloomberg went live with the scene, reporting that Bear Stearns was being occupied, the rest of the media turned out in droves.

They were all there just as they hadn’t been there while this crisis built in intensity. I watched a young reporter—one of those ”money honeys” from CNBC try to interview some of the homeowners but they turned their back on her. I later explained to them that they didn’t want to speak to them because they hate them for doing so little to expose the big boys. I am sure that viewpoint will not be heard on NBC’s business channel. I was told by a friend of Oregon that they caught a glimpse of me on CBS. I didn’t see Fox or, for that matter, the NY Times.

(The Times website carried the inaccurate Reuters report discussed below but did not deign to cover a protest by mere peasants preferring news about the elite. It probably was too taxing to dispatch a “foreign correspondent” from 40th and 8th to 47th and Madison, just across town. Instead the paper of record, preferred reports on banks being sued in the Clear Channel deal, the future of home equity loans, salmon dying in Chile and the arrests of Tibetans in China.)

To many other outlets, NACA, based in Boston, was following in the footsteps of those farmers from nearby Concord MA by firing a shot heard round the world. (Had it existed in those Times, the Times might not have covered that act of resistance by the “rabble”, ie. mere farmers, either.)

I haven’t seen all the coverage but this afternoon, I checked in on Google and found a pattern we know so well—downplaying the turnout, omitting the demands, and mischaracterizing the protesters. At the same time, because this took place at Bear Stearns as the financial crisis, deepens, it became big news and was soon everywhere, and worldwide from the AP to Michael Moore.com, from Business Week to the Guardian.

Here are some examples of the early coverage, if thats what it was:

THE “COVERAGE”

First Reuters (from 43rd St) which beat out the AP (that came all the way from West 33)…They reported “ABOUT 60 PROTESTERS, not homeowners or family members facing foreclosure but just “protesters,” as if that was their only identity and raison d’etre.. Then look at how they describe the Bear Stearns employees—soon to become former employees, by the way—but don’t quote any official from the firm for a reaction. That would have taken work.

NEW YORK (Reuters) - About 60 protesters opposed to the U.S. Federal Reserve’s help in bailing out Bear Stearns entered the lobby of the investment bank’s Manhattan headquarters on Wednesday, demanding assistance for struggling homeowners.

Demonstrators organized by the Neighborhood Assistance Corporation of America chanted “Help Main Street, not Wall Street” and entered the lobby without an invitation for around half an hour before being escorted out by police.

“There are no provisions for homeowners in this deal. There are people out there struggling who need help,” said Detria Austin, an organizer at NACA, an advocacy group for home ownership.

Bear Stearns employees were alternatively amused and perplexed, taking pictures on their cell phones.

“Homeowners, that’s more than $1 trillion (in mortgage debt), you’re crazy,” one man in a suit screamed at a protester on the street.”

I guess “one man in a suit” was the stand-in for Bear Stearns. Funny, I was wearing a suit.

THEY (THOSE PEOPLE) REALLY WANTED THEATER TICKETS

Now here’s DEALMAKER, a Wall Street Tabloid. They are even more snide and but at least put the number at 200, quite a few more than Reuters. But their second paragraph is as stupid as it is insensitive suggesting that the demonstrators “ wandered off to do whatever it is demonstrators do after a demonstration. (We’re guessing: wait in TKTKS line for Xanadu tickets.)”.

They seem to have wandered off? —Not really—many came from as far away as Washington and Boston and had to return home. The police had asked them to disperse—since they had no parade permits. And they did. But you wouldn’t know it by reading this “insider” account:

“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.

NOTE THE WORDS “WITHOUT AN INVITATION”

Do you need an invitation to enter an office building? Reuters apparently thinks so and CNBC concurs when it ran their dispatch:

“About 60 protesters opposed to the Federal Reserve’s help in bailing out Bear Stearns entered the lobby of the investment bank’s Manhattan headquarters Wednesday, demanding assistance for struggling homeowners.

Demonstrators organized by the Neighborhood Assistance Corporation of America chanted “Help Main Street, not Wall Street” and entered the lobby without an invitation for about half an hour before being escorted out by police.”

YAHOO also ran the Reuters dispatch. MSNBC used the number 200, not 60. ( I counted at least 300). There were 1872 related articles on Google. Only a handful have few points from protesters. This is as of 4:13 pm. There will be more TV reports and articles. The Daily News was one of the few local news outlets that actually covered the protesters at St Barts Church where they assembled on Park Avenue.

AS FOR BEAR STEARNS—HERE’S ONE INDUSTRY VIEW ON WHO SHOULD PAY, NOT BE PAID

John P. Hussman: Why is Bear Stearns Trading at $6 Instead of $2?

The large “term financing” and “term securities lending” programs initiated by the Federal Reserve do not expose the Fed to default risk in mortgage collateral it accepts from the banks that act as primary dealers. Even if the underlying securities default, those facilities involve repurchase agreements, so the bank putting up the collateral has to repurchase the collateral at the original price plus interest after a term of 28 or 90 days.

The Fed stands to lose only if the bank itself fails, and so spectacularly that the bank’s liquidation value goes negative even after zeroing out bondholder claims and stockholder equity.

Even in the present environment, this is unlikely.

Alarmingly, details have emerged that the Fed has agreed to a very different deal in its attempt to rescue Bear Stearns. This is a major and ominous departure from historical Fed policy, and from legality.

I’ll cut straight to the chase.

Bear Stearns is trading at $6 instead of $2 because unelected bureaucrats went beyond their legal mandates, delivered a windfall to a single private company at public expense, entered agreements that violate the public trust, and created a situation where even if the bureaucratic malfeasance stands, the shareholders of Bear Stearns will either reject the deal or be deprived of their right to determine the fate of the company they own. Very simply, Bear Stearns is still in play.

Still, when all is said and done, my own impression is that the ultimate value of the stock will not be $2 but exactly zero.

In effect, the Federal Reserve decided last week to overstep its legal boundaries — going beyond providing liquidity to the banking system and attempting to ensure the solvency of a non-bank entity. Specifically, the Fed agreed to provide a $30 billion “non-recourse loan” to J.P. Morgan, secured only by the worst tranche of Bear Stearns’ mortgage debt. But the bank — J.P. Morgan — was in no financial trouble. Instead, it was effectively offered a subsidy by the Fed at public expense.

Rick Santelli of CNBC is exactly right. If this is how the U.S. government is going to operate in a democratic, free-market society, “we might as well put a hammer and sickle on the flag.”

Leave it to CNBC to throw in a little red-baiting.

MITIGATING FORECLOSURES

“How can this cycle be stopped before millions of American families lose their homes? If the federal government is going to be part of the solution, political reality - regardless of economic exigency - will require the following of any plan:

* It cannot involve “massive government intervention,” or it risks the threat of veto by President Bush
* It must pay for itself or include offsetting tax hikes or spending cuts to comply with the pay-as-you-go (PAYGO) constraints Congress has imposed on itself
* It cannot involve a bailout of either financial institutions or investors who have lent to homeowners or to homeowners who have borrowed, except perhaps in “predatory” cases, since “bailout” is a dirty word, connoting taxpayer exploitation”

The Virginian Pilot: Bankruptcy Filings to Save Homes Are on the Rise Locally

Mar. 25–For years, cash-strapped individuals who sought to keep their homes by filing for bankruptcy blamed a handful of causes: heavy credit card debt, loss of a job, hefty medical bills. For the first two months of this year, the number of Hampton Roads individuals trying to hold onto a home or other major asset by means of a Chapter 13 bankruptcy jumped 84 percent to 373 from slightly more than 200 for the same period last year, according to the U.S. Bankruptcy Court’s Eastern District of Virginia. Another part of the bankruptcy code, Chapter 7, allows individuals to wipe out most of what they owe but usually requires that they liquidate major assets such as homes.

BANKS CRY THE BLUES

First, Deutsche Bank says it will fall short of its profit targets:

Deutsche Bank AG, Germany’s biggest bank, said the U.S. subprime collapse and slowing economic growth will make it harder to reach a full-year profit goal.

Deutsche Bank fell as much as 2.9 percent in Frankfurt trading after it said further possible asset writedowns and worsening economic conditions would “adversely affect our ability to achieve our pretax profitability objective.'’

CITIGROUP NEXT?

A top bank analyst sharply lowered her earnings forecast for Citigroup and said she will announce reduced estimates for other firms:

Citigroup Inc.’s first-quarter earnings-per-share estimate was cut to a loss of $1.15 by Oppenheimer & Co. analyst Meredith Whitney, who said she was also cutting estimates for other U.S. banks.

Whitney lowered the earnings-per-share estimate on Citigroup, the largest U.S. bank by assets, from a loss of 28 cents, citing estimates for first-quarter mortgage and collateralized debt obligations-related writedowns, according to a note to investors dated yesterday.

Whitney, 38, correctly predicted two months in advance that Citigroup Inc. would slash its dividend to preserve capital. Her downgrade of Citigroup helped spur selling that erased almost $500 billion in value from the nation’s stock market.

FT: CITIBANK STILL PAYING OFF ON LAST SCANDAL

Citi to pay $1.6bn in Enron case

Citigroup C has agreed to pay $1.66bn to Enron’s creditors to settle two of the biggest remaining claims over its role in the Houston energy trader’s 2001 collapse.

AP: US Home Prices Drop in January

NEW YORK - Home prices in many cities continued to plunge by record levels in January as sellers cut their asking bids and rising foreclosures took their toll, new data showed Tuesday.U.S. home prices fell 10.7 percent in January, and the Standard & Poor’s/Case-Shiller home price index of 20 cities saw the steepest decline in the index’s two-decade history.Only Charlotte, N.C., squeaked by as a gainer in the Case-Shiller index, with a 1.8 percent rise in January compared to a year earlier.

Blue Collar, Bare Cupboards

Sasha Abramsky, reporting for In These Times, writes: “Across America, close to 40 million people are listed as being ‘food insecure,’ according to the USDA. That means that even if they don’t actually go hungry, they constantly worry about how to put food on the table.”

HANK PAULSON: “SOCIAL SECURITY FIX NEEDED” (TRANSLATION: HERE COMES THE TOTAL AND COMPLETE LOOTING OF SOCIAL SECURITY)

THE MONEY LAUNDERERS: A PICNIC FOR WALL ST. INSIDERS