The Beggar's Banquet

Chairman Ben Bernanke
Chairman
Board of Governors of the Federal Reserve System
Washington, D.C. 20551

Dear Ben:

I hope you don't mind the informality, but I feel like you should always be able to call your banker by his first name.

I noticed this morning that one of the factors in deciding to "rescue" Bear Stearns was the possibility that they might file Chapter 11. Because of this, I am thinking of filing Chapter 11 too (I have less net worth than most of the people you bailed out over there, and I did not act with the stupidity and reckless abandon of Bear's management). Any chance you are willing to send $30 billion my way too.

Thank you for your willingness to make sure I am every bit as well taken care of as the deserving folks at Bear Stearns.

Respectfully yours,

Neil Grossman

Comments

[Sundialsvc4]

Hi, Ben! I agree with Neil. (I think I should be able to call columnists by their first names, too.)

In fact, it's one big happy party over here, because all of us have figured out that "You're the MAN, Ben!" Why, with this great big fat source of "endless easy-money" that you seem to have found, none of us have to work anymore.

So, all of us in this bar tonight are sending you their bills for $30 billion. Apiece. Hey, why not? "You're the MAN!" Money for everyone, money for us all. Ben, you sure do know how to win a popularity contest.

Thanks!

[gopindrag]

Quick, remind me why I care about bailing Bear Stearns out?

[joelaf]

About a month ago, I spoke to an investment advisor. He was pretty hot to help me invest my 401K.
I got the money and took it to his firm. They are really scared now. In the last month, they have moved ALL their customers to low yeild, LOW return investments. I asked them about the Bear Sterns deal.
They said it was a test ballon to judge the publics reaction. According to them, there are quite a few big name firms who have have made quiet inquiries about receiving the same type bail out. He told me when the names go public, jaws are going to drop. I'm thinking about putting most of my money in metals. So far , I have 16 pennies (copper), 3 dimes (silver), and several nickles ( nickle, duh) If I stay solvent, shouldn't the FED bail me in (not out)?

[FirstShirt]

I am the first to admit that others are more competent in this than I am. With this disclaimer let me make this point. The bail out of Bear Stearns wasn't a benelovent act to save the ample backsides of corporate execs. If Bear Searns failed it would drag down others such as pension funds who, as part of their diversification of portfolio, put money into risky and higher yield investments. Think you have problems with a foreclosed mortgage? What if you lost all of your pension and that of your company?

[Neil Grossman - Huffpost Blogger]

You are right, there are lots of people with vested interests in Bear Stearns who would have been hurt. (By the way, other businesses, like Enron and WorldCom in recent years, have been through this; although their investors were not as fortunate). But that is the point of capitalism. Investments are made with the expectation of returns that exceed risk-free alternatives. If you did not believe you could beat the lowest risk alternative, you would not take the chance. (By the way, it is not widely publicized, but there are long periods of time when the best, or near best, performing asset class has been US Treasuries­.) The general idea is that diversification is your defense against default or general non-performance of a portion of your assets. Most pension funds have had their share of defaults over time; but they have also had investments that have outperformed. However, when you take the risk, you should not get the return on the riskier investment and the protection of the risk free asset. In Bear Stearns case, equity holders did pay a steep price, but lenders have been protected in total.

[hopeless277]

Moral of the story, if you're gonna steal, steal big.

[Purple Girl]

Dear Ben,
Your Companies Business Practices have proven themselves over the last 7 decades to have Failed to Provide the Services which were Outline on your contract with US. Due to the Serverity of the MalPracitce your Company has Inflicted on the Clients, Immediate Cancellation of any further service Is now in Effect and Past actions will be considered In A Class Action Law Suit. US vs 'The Federal Reserve' and their Co defendent the IRS


Sincerely,
US
Those who you've used theri OWN laws Against them in the Pursuit of Financial and Influential Gains (TREASON)

[peterg76]

I think if it really came down to it, they would just admit that, yes, they really are hypocrites.

[Stillman]

You're making a joke out of this, but you may have inadvertently stumbled onto one of the great cover ups of our time. The Fed, and especially JP Morgan, DID NOT WANT SOMETHING made public if Bear Stearns went bankrupt. What are they hiding??? I don't know enough about finance to figure this out, but someone needs to take a very close look at what's going on inside these financial houses. There's no oversight anymore. I've heard all of Wall Street is just one gigantic ponzi scheme, and that there are trillions of dollars of non-existent "assets" on their books.. Anybody have any insight?

[Neil Grossman - Huffpost Blogger]

To be honest, i have spent a long time on Wall Street; and there is good and bad. Ponzi scheme is not the term i would use. but there is unquestionably an enormous amount of leverage (a relatively small amount of capital supporting a relatively large amount of debt). leverage is one reason this country's economy has generally grown at a reasonable rate, why the US government, states, municipalities, corporations and, yes, even we little people, can borrow money reasonably efficiently. Unfortunately it can also lead to excesses. sometimes even worse. when things go bad, they can go bad in a big way. like the sub-prime disaster and the Wall Street wreck. I wrote a piece last summer on my blog thoughtngine.wordpress.comm) that discussed the repeal of the Glass-Steagall Act. Glass-Steagall, passed in 1933, was implemented after the Depression to prevent the type of financial problems (like conflicts of interest) that lead to the depression. Funny thing, Congress repealed Glass-Steagall in 1999. It did not take the commercial and investment banks long to show how good an idea Glass-Steagall was. Not to worry Congress is good at denying their own short-sightedness; but they may actually do something about this.

[dadw5boys]

When people wake up and see that these Banks and Investment Companies don;t want to deal with the Bad Laons they have made because of the OVERWHELMING COST they will see they are trying to DUMP THE LOANS on the Taxpayers but Keep TITLE to the properties.

If they are bailed out all the TITLES to the property needs to come the the U.,S. Government.

NO OTHER WAY TO GET BAILED OUT.

By dumping the bad loans on the Taxpayers they get to keep their HUGE SALARIES, JOBS and STOCK OPTIONS.

[maggiemae656]

I agree with you...the U.S. Govt. should take title over any loans being rescued.

The problem is that the banks are BUST...if they foreclose, they get the house and the house ain't worth what it used to be. They have chosen the path of not wanting to work things out with the homeowner and I don't want to work things out with these banks with taxpayer funds.

What are the consequences to these mortgage makers? They are still in business, Wall Street continues to support them even after what they did to them, and the government feels some misplaced responsibility to keep them from going under. There are other banks in town...let the dregs of the industry take a dive and let us be done with them. These banks are too big.

[Neil Grossman - Huffpost Blogger]

The only upside from Taxpayer funded bailouts should go to the Taxpayer. Bear is a good example.Si­nce it was a Guaranty from the Government that made the deal go, the Fed should have taken the equity stake in Bear (a very big one). They should never have given JPMorgan a $29 Billion Guaranty either. And, by the way, they should have also made sure that the debtholders also suffered some loss.