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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Amazing for what qualifies as restraint-of-trade, collusion, intimidation, etc., and what doesn't. Just like leaf-blowers in the 10 most crappy items article - if it's good for business, it's good for America, apparently.
Does anyone need more Proof of the culture of Indentured Slavery?
JP Morgan was one of the Profiteers who Set up the Facade of the'Federal Reserve', they've been swindling and selling US for nearly a Century. time to Fire the Private Banking firm misleadingly called the 'Fed's'
The man says: "There will be winners, and there will be losers..".
..it's too bad the ratio is 97 to 3.
Anyone else here miss Keynes economics???
miss Keynes economics? I just want it to go away and it won't leave.
First the Bankruptcy Law, now let's hope these financial fascist don't bring back Debtors Prison. But it is troubling to hear Jamie Dimon mixing bad economic policy with the worst forms of American Nationalism., with stupid ideas like, "it would be "unpatriotic" to go after Bear Stearns employees" Where will it end. And no, Bear Sterns was not a "Sacrificial Lamb." Don't buy into the Larry Kudlow way of thinking, it just continues to excuse bad economic policy.
Lary Kudlow is simply a parasite that sucks on the boil that has become American corporate capitalism. Lance the boil and the fettid mess inside and he won't have anything to feed on.
I must confess I will miss those silly but arrogant little snippets of his, where he made such fun of the weak "Euro" and Canadian dollar.
Do the CEOs belong to a secret union?
"HA!"
Now that was funny..... : )
yes, they are called trade unions, they are united against the workers that make their companies tick.
Raped employees?
Must a be a disgruntled shareholder.
New flash: Said employees brought this on themselves. Boo fooking hoo.
What a vile and disreputable analogy.
Right - so the administrative assistants and low level supervisors had ANYTHING to do with the upper management incompetence that lead to B.S.'s downfall. If ANY of those people's retirements are jeapordized by this - it's rape.
It is horrible and tragic to lose your job and potentially part or all of your retirement when a company goes belly up. I know a single parent who had this happen to her when she was 7 months pregnant and she lost her job, her stock options, her sick time and vacation time (that was supposed to pay for her staying home for six months after the baby was born).
This type of company take-over is so loved by Wall Street and has been so thoroughly documented that many names have been given to it and its aftermath. It has been called predatory, capitalistic, unfair, greedy - and many more names. But it is not rape- a specific horrible crime with it's own definition that is not legally confused with mugging, assault, attempted murder or any other crime - , nor could it ever be. It *is* a vile and disreputable analogy, as any victim of rape can tell you, losing your job and even your retirement does not come close to all that the actual crime and aftermath entails.
Thanks for providing more galling and outrageous details to this already sad tale of greed and mismanagement. I just don't understand why our country's business and political leaders can't learn from history, specifically the Great Depression and the Vietnam War...
Maybe they believe in "peak oil". Maybe money is a security blanket. Maybe it pays for awesome hookers. Who cares; nothing we can do about the past.
Our business leaders took one look at what Bush/Cheney were getting away with and decided to grab on to their own piece of Taxpayers money.
There's more than one way to be a profiteer.
This is just another example of Republican Socialist welfare, in which the powerful are, insofar as possible, protected from all harm.
Oh God, if wasn't bad enough that Christian Fascist, mix Christian religion with the worst forms of American Nationalism. But now Financial Fascist like Jamie Dimon are mixing Reaganomics with the worst forms of American Nationalism., with stupid ideas like, "it would be "unpatriotic" to go after Bear Stearns employees" Where will it end.
And I don't buy into Bear Sterns being a "Sacrificial Lamb" They saw this crap coming last year, when they used the new Bankruptcy Law to keep shareholders from suing them in New York or in going after their assets in the Cayman Islands. Once their CAUGHT they love to portray themselves as "Sacrificial Lambs". Their thieves.
"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."
EXCUSE ME?
The employees owned a large percentage of the stock BY CHOICE.
They worked in an 'on the edge' risky financial environment BY CHOICE.
They owned it.
They broke it.
They are now accountable.
If all they lose is their proverbial shirt, they should consider themselves so lucky.
Prison is another choice.
The "moral/values conservatives," and "fiscally conservatives" republicans will buy into this all while leaving Americans to twist in the wind of the mortgage lending fiasco. Gotta love those republicans!
I think some very important and valid points were diminished by the hyperbole. We haven't completely sunk into feudalism. Yet. Some are working very hard at it, but we're not there yet.
i have always conjectured that greed would bring this nation to ruin...long before racism..drugs..or crime got a lick in.for decades this nation has allowed crooks to sell homes ..something all human beings require after food water and air to breathe...that cost 50,000 dollars in labor and materials costs to build for 200,000 dollars.if those homes were by law sold at 150 percent profit instead of 300 percent...none of those homeowners would be facing foreclosure.but if one were to say in america...cap profits after taxes and other overhead at 150 percent...he or she would be called a communist or socialist.one need only listen to how the homeowners are being disparaged..as being unworthy of the mortage loans they received...while the crooked sob s that gouged the poor owners by selling the homes for 5 times what they were worth get bailed out with taxpayer dollars.a college economics proffessor of mine once explained..economics was never a true science and that his job required teaching to the test..but that the truth is..cutthroat western capitalism is merely comunism for the rich and powerful...each multi-millionaire getting according to their needs..while the people/proletariat starve and that if market shifts and curves were not under the constant manipulation of governments..no market would survive.this it now seems to be the case more and more every day.
Trust me, the money is not easy. Most people on Wall Street are hard-working people who pay a pretty heavy personal toll for the nice bucks they make in some very high pressure careers. A very small number of people were involved in letting Bear Stearns take too much risk - however, large numbers of rank and file employees were hurt and hurt badly. I have lots of friends there and really hate to see this happen to them.
DM92
I, too, know plenty of people who will be hurt by this, but the money they make, generally, is all too easy. Having worked in the financial services and consulting industries, I know, first-hand, that many of these B-team students running around with their MBAs have a relatively comfortable life.
I now work as an artist in the entertainment industry. My union wage is nothing compared to what I'd be making in the financial sector. I still work upwards of 60 hours per week, with the stress of knowing that one wrong decision, on the fly, in a fast-paced environment can effectively end my career.
You'll find hard-working people in high-pressure careers in all industries. It's just that some industries control the way the rules are written and enforced, and who profits.
Unfortunately the mythology of the sanctity of the "free market economy" buttresses the further lie that these Wall Street and corporatist jobs provide more worth to the populace.
Where have all the fiscal conservatives gone, knowing this round of government welfare has bailed out their second homes?
yes indeed. The little people will get hurt by this....the guys at the top fly off with their ill-gotten parachutes. Saw the exact same thing during the dot.com implosion....the financial markets are doing the same damned thing.
"...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. "
Yes, those many layers is what they call Compliance, it comes with govt Regulation, and gets you FDIC, aka government insurance for your clients' $. And it's just what Bear didn't have, which is why their investors were running for the hills. Bear was so over spent that bankruptcy was the only remaing option. Under Chase, Bear investors' money is at least a lil' safer.
Bear got what they deserved and precisely because it was too easy for their agents to work deals by chumming up with the CEO. What options did they have left?
Money grubbing traders ruined the company and we're supposed to cry for them? forget it.
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