Exclusive: Bear Stearns Employees Already Financially Raped, Now Possibly Enslaved
JP Morgan's CEO 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 and now is reportedly trying to enslave them by strong-arming the rest of Wall Street away from hiring refugees.
I have learned that Dimon has called CEOs of investment banks saying that it would be "unpatriotic" to go after Bear Stearns employees until he has had first choice over who to keep and who to fire. While many have argued that the Bear deal was in the best interest of JP Morgan, Dimon appealed to his counterparts that "what he did was in the best interest of the country."
Backing up the force of this logic, Dimon reportedly also threatened to cut counter-party credit lines to firms that poach Bear stars before the transaction is completed. (Counter-party credit lines are used to support trading off exchanges in the opaque and less-regulated over-the-counter markets for everything from stocks and bonds to the rapidly growing zoo of more complex investment tools including exotic derivatives and credit default swaps.)
A CEO of one of the major banks, who requested anonymity, said of Dimon's threats that "this is outrageous. We will hire whoever we want. " A call from a Treasury employee was also reportedly made on Dimon's behalf. Another top Wall Street player, who also requested anonymity said, "It's dirty pool. JP Morgan and the Fed engineered a rescue to stabilize the financial system by putting Bear's portfolio in strong hands. The employees are the carcass of that deal but not essential to the market's stability."
Yesterday, JP Morgan raised the buying price from $2 to $10 following growing outrage at the lowball price offered for Bear Stearns. It was no secret that there were European banks and private equity firms willing to pay more for Bear Stearns. British billionaire Joe Lewis, one of Bear's largest investors, also lobbied for alternatives.
After raising the stock offer, Dimon said, "We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise."
The reason that JP Morgan got this sweet deal is that the bank is the custodian for Bear securities and it was an easy transition. There are 14,000 Bear employees and JP Morgan is unlikely to keep all of them. Dimon is trying to prevent the poaching because the stars will have other outlets and JP Morgan is not a natural fit for those who have worked in the Bear culture.
As one expert explained, JP Morgan is run like a big bank where there are many layers of people required to get credit approval for a deal. Bear was run very much like a small business and was entrepreneurial and far more nimble. A banker could walk into former CEO Jimmy Cayne's office and have a deal approved in a short time. With JP Morgan, a banker would have to schedule many more meetings with the credit committees, the sub committees, etc.
This is not saying that one system is better than the other. One could argue that Bear's culture didn't have enough safeguards on lending since the bank was highly leveraged at a rate of 30-1, leaving a smaller cushion against defaults and losses than at banks that borrowed less.
Some are asking why was Bear the sacrificial lamb on Wall Street? With hundreds of billions in write-offs, somebody was going to go down and as long as one went down, the rest were okay. Since Bear was so leveraged, it was the biggest target, the weakest and the one who would pay for everyone's hubris. But the banks' credit lines are all intertwined since each protects the other with short term credit lines when needed. The fear was that the instability caused by Bear's freefall would cause a run on the banks and people would take their money out and it would cause a domino effect that would impact the whole system. Hence the Fed's involvement and rescue.
But Dimon's rumored threat of pulling the counter party credit lines to banks that hire Bear stars crossed the line of Wall Street etiquette. Indeed, it was pulling of counter party credit lines that brought down Drexel in 1989. Dimon's spokesman, Joe Evangelisti, denied the story.
But I believe my sources and feel that Dimon already got a great deal -- even with the amended $10 stock price. Last week he would have gotten the firm for $236 million vs. now 1.2 billion in stock. By any measure, he already is a big winner. Let the employees choose for themselves what bank or firm they want to work for after many of their savings have evaporated like a Harry Potter spell gone bad. JP Morgan should retain Bear employees by offering the best deal and home for them and not have any extra leverage to keep them handcuffed to a place that already has caused them so much pain.
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You live by the sword you die by the sword, they were making good money at an average salary over $250,000 a year(plus matching bonus's on avg) if they couldn't retire after 4 years their Fing morons. Let em rot, thats capitalism. Let em get apartments and live on $30,000-$50,000 like everyone else.
Two pension funds in Michigan have filed for a TRO against the JPMC acquisition of the Bear.
Probably JPMorgan Chase people don't want the stars and top quality people they believe they need to make the deal work to leave before the deal is done, to take knowlege of Bear's business before they can discharge them as well as take customers and company methods with them to competitors. It probably only affects a small number of employees, that is not those making under $100K and most likely to be dumped anyway. Those employees are the ones that will get screwed the most anyway.
Hmmmm. So. Bear Stearns was leveraged at 30:1 and ? I know of one firm working at 100:1 and they're still doing whatever.
I have no brief for or against BS, it just strikes me that on the Friday, their stock was trading at $30 but the first deal from the JPMC hitmen was 'take it or leave it' $2/share -- with the ~help~ of the Fed. So. Then the strock was still trading, concurrently Joe Lewis was making waves ... even as JMPC moved in like they really owned the place. A building worth 4X the offer of last resort price? Pull the other leg. So. Suddenly the offer is improved, eh?
JPM has been 'assisting' the American economy since 1916 -- patriotism hand-in-glove with profit. First in line to pick over the bones of Enron ...
What was it Volker said to Charlie Rose re the Fed. Oh yeah, "Well ... it's independent." Once you get a grasp of that, the rest of the finanical kabuki is chrystal clear.
Meanwhile, Lehmann Bros. could be next. And ... how's your 401(k)?
Spent it surfing in Bali, golfing and wenching in Thailand......ya can't take it with you!
I rather doubt that the "big boys" on the Street are quaking in fear at Brother Dimon's threats.
Rather these are probably seen as indicating that the transaction isn't turning out to be such a sweet heart deal for JPMC as first thought.
Apparently, there was a clause in the first merger agreement under which JPMC guaranteed BSC's liabiilties even if the deal didn't go through. That's one of the reasons for the "redo" and the higher price.
The problem for an acquirer of an investment bank is that the prime assets of the firm walk into the building each morning and walk out in the evening. This is particularly true for the prime brokerage area. Clients generally "love" their brokers more than the firm.
My advice to Jaime - "Suck it up and be a man".
Like with every crises, white collar crime is called just that. And publicly traded companies are not really guided by the public. The abilities of CEOs are not the subject in hiring but decided by the few majority stockholders, who are of course not owning the majority. To really fix the system it would take regulations that this country will never do because they are so "communist". The phrase of social responsibility of the wealthy is rarely subject of anything and the Enron cycle spins another wheel, while the treasury is being plundered by the other white collar criminals. While the CEOs of such failed endeavors are sipping their martinis on board of their yachts, their former employees spent their retirement in the supermarket baging groceries, because their minds are rotting away because they did not like health care reform and their benfit plan does not provide medication to postpone their dementia.
Now Jill, it doesn't surprise me in the least that the CEO of JPMorgan would view the employees of newly acquired Bear Stearns as chattel whose fate can be manipulated, but how does a situation where the Federal Government, at the Presidential level, steps in an forces a business transaction to take place, promises to underwrite the losses of the beneficiary, JPMorgan, with taxpayer dollars be misconstrued by Mr. Dimon as an act of Patriotism on he and JPMorgan's part?
What clown car did Mr Dimon flop out of, exactly?
During the Long Term Capital (LTCM) collapse and subsequent rescue by the coordinated participation of the investment banks, Bear Stearns was the only major that refused to participate. Karma?
The full extent of the damage from the sub-prime crisis is yet to be told, but Wall Streets losses are at least 4X what's currently been reported.
Meanwhile, the average pay -- including those on the bottom -- for Wall Streeter's was over $340K this year.
Jesus wept.
Exactly, no reason to feel sorry for them. They deserve what their getting. Its the poor people with their 401K's for retirement that I feel bad for.
Corruption and greed at an unparalleled level, and then this goon thinks that the employees are slaves to his wishes? People need to wake up and smell the crap coming from this country.
The excesses increased within this administration threaten the viability and stability of the country and regulations need to be healthy, enforced, and some really good criminal indictments and convictions of this bunch of thieves needs to take place.
We used to own slaves in this country. They worked for free without benefits - do you really think corruption is worse in this country than it used to be?
Of course some companies in this country are bad but we also don't have children working in factories for a few dollars a day. I'm just pointing out that it's good to have perspective...
Give it a few more years.
Do you realize how many Americans have worked for companies that have gone bankrupt? The don't get ANYTHING and they WORK HARD but don't make millions. The employees at BS didn't want to share with us when their company was making billions from fruadulent mortgages but now we're supposed to have sympathy for them.
And also do you know what "rape" means? It is specifically about women being sexually assualted and although using the word here might get you more attention, I think it's lame when women use that word just so people might notice their writing.
Maybe I was overreacting a little...
"Maybe I was overreacting a little..."
No, you were not. There were many people who took offense at using the word rape to describe a business failure.
Now remember this children, as you watch the plight of the poor BearStearns employees. Enter the sometimes lucrative, but utterly non-producitive life of a paper pushing money changer at your own peril.
Easy there, surfcitysteven. "Utterly non-productive," is completely wrong. As a self-described "paper pusher," I am under no illusions that I am trying to cure cancer every day... but I also know my work isn't completely worthless. It may not be so morally fulfilling, but it does play its part in the economy.
And those who specifically work in banking (not me) are actually quite productive members of the economy. Banking is, always has been, and always will be an essential feature of any sustainable economy.
You may prefer to sit on the beach and get stoned all day, that is your prerogative... but don't disparage others for choosing a different way.
Now, if they claim that they are doing some sort of ultra important work , and are full of themselves, just because they make a lot of money, then you can give them shit and a douse of reality. For sure, there are a lot of people in the industry who do have this over-important attitude, and perhaps that is the motivation behind many of the posts here... but don't forget there are still plenty of paper pushers out there who are aware of what is really going on in the world.
And by the way (since this is the Huff Po), I am a Clinton supporter... cause I am realistic.
I'd say you're a Clinton supporter because you're a DINO, based on your b.s. post.
People who make their living by siphoning off a fraction of other people's assets are parasites. And the not-so-new breed of bankers who privatize profits and socialize losses for themselves deserve to be destitute, not rewarded with a comfortable early retirement.
Heidfeld; Every one in one way or another is a corporate economic slave.
God, don't you just love corporate America? I wish we could return to America V1.0. This Bush/Cheney upgrade is way too buggy.
Time to buy shares in those mobile document shredding companies. When the Democrats do take over, and the investigations begin, these guys will be very busy.
Amazing. How many years of "let the markets work" have we heard?
Apparently, this philosophy only applies when convenient. As in, it's ok to "let the markets work" when Republicans are arguing to eliminate social security, but not ok to let the markets work when a big Wall Street investment firm goes belly up.
If these 'Gamblers' lose on theri invetments- so goes the life of gambling. Let them answer to their Creditors. We never agreed to finance them at the casino, Nor take the beating when 'guido' came to call- Infact lets' ship them off to 'Guido's 'Doorstep (once we get reimbursed fro the money they stole out of our Pockets first) Let their Chinese and Arab backers seek retribution in their own ways for such Con Artists.
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