March 19th, 2008
Bad Decision at Bear Stearns
Capital Preservation: Don’t risk more than you can afford.
Bear Stearns Plans $3.2 Billion Hedge Fund Bailout (Bloomberg)
“The bailout was a major departure for the firm, which
has long resisted putting much of its own capital at risk.”
Quoted from International Herald Tribune, June 23, 2007
March 19th, 2008 at 2:35 am
There’s no affordable soultuion for the disasters of bad management.
Italian main airline company “Alitalia” (http://www.bloomberg.com/apps/news?pid=20601087&sid=abG5WXU_8Xz0&refer=home)
is currently on the brink of failure and the only hope is that french & dutch will buy it for spare change.
Did you know that after 5 years of bad results (i.e. very high losses) its managers got payed more than the double per year than Spinetti (Air France CEO) who in those very same 5 years saved the french company from a difficult situation and made it one of the most powerful in europe?
March 19th, 2008 at 5:42 am
Eidur. It’s crazy. The Board of Director’s are responsible.
It’s their duty to protect the shareholders, and fire the CEO
if he is not performing. They also set the pay for the CEO.
March 19th, 2008 at 5:51 am
Don’t forget your Federal Reserve is guarantor to JP Morgan for $ 30 billion in securities under the deal that was thrashed out over the weekend, so compared to the 3 billion bailout of the hedge fund by Bear Stearns that’s small beer in the overall scheme of things.
Additionally the Federal Reserve has made $ 400 billion available to the banks to assist liquidity ,Stearns was simply too slow off the mark and did not anticpate the run on its funds.
As far as I can gather the worst of the losses are now identified which will probably total around $600 Billion.
Best wishes
March 19th, 2008 at 6:17 am
I never tought that the Fed would choose to follow such a similar path to the one Bank of England pursued with Northern Rock. “Socializing” the risks (i.e. making the community of people pay for disasters caused by few) with the nationalization of the Norhtern Rock bank was simply crazy. Probably the Fed has more infos, I just hope they know what they are doing.
And honestly, the US admin should really cut the expenses about the Iraq campaing now. That money is needed elsewhere.
March 19th, 2008 at 9:11 am
On another note altogether… I like your underwater themes Sera! Good metaphor too.
March 19th, 2008 at 9:29 am
I am so glad someone spoke up on this issue. Glen Tilton, the CEO of United Airlines was living in a downtown Chicago townhouse that cost the company $18,000 a month while UAL bled $24 Million a Day! When Doudlas Steenland, CEO of Northwest Airlines took that airline into and out of Chapter 11 bankruptcy he was paid $2.7 Million! During the Delta Bankruptcy, the morons paid former CEO Leo Mullins $1 Million and Ron Allen (considered one of the worst CEO’s in Delta’s history) $650,000. The board of directors in this country better wake up and stop believing in the “smoke and mirrors” about “paying for talent”. As far as Bear Stearns? Our government bailed out Lockheed and Chrysler, but what about Pan Am? The argument was: “Pan Am’s demise (at the hands of our government BTW) will not affect national security”. How does Bear Stearns affect national security. I say put the management on trial and shut them down. That money can be used to fund the pension for Pan Amer’s–America’s “Chosen Instrument during WW II, Korea, Vietnam and the Gulf War. It was a bi-partison lynching!
March 19th, 2008 at 4:58 pm
I’m not american…i don’t understand… *pouts*
March 19th, 2008 at 6:56 pm
Another case of corporate mismanagement.
March 19th, 2008 at 7:16 pm
I love the frase: “Don’t risk more than you can afford”
It can be used for so many things in life!
March 19th, 2008 at 9:37 pm
According to Paul Krugman the $400 billion provided by The Fed (which is privately owned and not a government department) was half of its stash. it’s called the Fed but it isn’t federal and has no reserves. Check Wiki for the history since it’s very interesting.
The invasion and occupation of Iraq is wholly funded by borrowing and the only way to deepen keep the economy afloat is for Americans to continue spending. Quite the conundrum, n’est pas?