Wachovia deal gets a strange spin – JPM responsible for LEH bankruptcy???

The FDIC’s chairwoman Ms. Bair, who has shown to have more guts and skills than Bernanke and Paulson together, backs up a Citi takeover, which is a mistake for many reasons. It’s not the government who should decide about the shareholder’s fate. It’s enough that the CEO’s were ruthless and stupid but the final decision to whom a company is sold is neither a court’s decision to make nor the FDIC’s. On the short list of banks in trouble of the FDIC, Wachovia was not mentioned, which does not speak for their oversight not to mention the ever-wrong FED. That it is backing a deal to save a bank was still the right thing to do and it was not a smart thing to walk away from Wells Fargo in order to rush back in after the Citi deal in order to decrease the price by $3 from $10 to $7. Having the choices, it might not be wise for the government to do the bailout with a weak partner and puting taxpayers money at stake. The loss provisions for whomever is taking over Wachovia is about $72 bil. at least– that’s not something Citi can handle, basically. Citi will benefit big time from trippling the deposit base and I am sure that’s the only way they can survive for a while or buy some time. Whether that saves them finally has to be seen. In any case, merging a sick bank with another sick bank on behalf of taxpayers’ and stockholders’ money would be a fatal decision medium-term and is against the constitnstitution.

Excerpt from WSJ

The fight over control of Wachovia intensified, as a judge temporarily agreed to block the sale of the bank to Wells Fargo, Citigroup announced in a news release late Saturday.

State Supreme Court Justice Charles Ramos issued the order blocking the sale of Wachovia Corp., which Wells Fargo and Co. had agreed to purchase in a $14.8 billion deal.

Citigroup Inc. accused Wells Fargo of trying to cut off its earlier takeover offer of Wachovia’s banking operations for $2.1 billion in a deal struck with the assistance of the Federal Deposit Insurance Corp. On Friday, four days after that deal was struck, Wells Fargo said it was buying Wachovia.

I actually believe that the FED, Teasury and Mr. Fuld should be sued by LEH stockholders for severely neglecting their duties and producing misleading and/or false information about the economic situation. Mr. Fuld acted completely irresponsibly in best case – in the worst case, he did that on purpose (Neuberger, the asset management arm, valued at $8 bil one month earlier was sold at $2 bil. – someone has profited big time by these events and may have paid besides official lines. Once Amsel Rothschild says you buy, then blood is on the street but what he realy meant that is the times when people who have priviledged opportunities and information can make a ‘killing’, as did the ones who had the ‘foresight’ to buy OCT 5 calls of Wachovia???)

Finally, they bailed every big one out except them. That is not a systematic way to deal with a crisis, since we have obvious conflicts of interest for an ex-Goldman CEO (Paulson) here at hand. As it turns out, we have another participant in the failure of LEH which is JPM as their custodian bank. In any case, the LEH bankruptcy is a fish that stinks from all ends and why does JPM gets taxpayer sponsered multi-billion dollar presents and is involved in almost all the bankruptsies (the Morgan family and Rockefeller families are in the background – they had a big stake in Chase Manhatten which is a part of JPM).

Excerpt from WSJ

Unsecured creditors of Lehman Brothers Holdings Inc. asked a court overseeing the securities firm’s bankruptcy proceedings for permission to investigate how Lehman ran out of money.

The creditors’ group alleges that J.P. Morgan Chase & Co., which acted as a financial middleman between Lehman and other lenders, helped spark a “liquidity crisis” at Lehman before the firm filed for Chapter 11 bankruptcy proceedings earlier this month, according to a filing in federal bankruptcy court in New York.

In a statement, J.P. Morgan said, “These assertions raised by the creditors’ panel are unfounded conjecture. We will address them at the appropriate time in bankruptcy court.”

The document, filed Thursday, is one of a growing number of filings aimed at unraveling what happened in the final days of the firm. Lehman filed for bankruptcy protection on Sept. 15, after the firm had reported a preliminary third-quarter loss amid a sharp drop in its stock price and heavy client withdrawals in the previous week. An effort to sell Lehman to Bank of America Corp. or U.K. bank Barclays PLC failed, though Barclays subsequently agreed to buy Lehman’s North American operations.

It’s not the time people should make bargains on behalf of taxpayers and JPM does big time with the ‘special’ support of the government and still their stock is overvalued by all means.

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~ by behindthematrix on October 5, 2008.

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