Wall Street Gets Taste Of Their Own Medicine

Having worked on Wall Street for over a decade prior to my escape from the ‘real’ world, I find in somewhat ironic that some of them are now feeling the same pain that so many of their customers have felt over the years.

You remember Enron, WorldCom, Global Crossing, Health South, Tyco International where the investors got totally shafted?

Bear Stearns, the fifth largest investment firm is no more… It should have been allowed to go bankrupt like any other failed company but of course bankruptcy would have really hurt because the top executives would be forced to return the US$2.06 billion dollars in bonuses that they put in the bank just eight weeks ago, and unsettled the rest of the market…

JP Morgan did not want to take on the risk of acquiring Bear Stearns to begin with but because the Fed then transferred the risk of Bear’s bad mortgage bets to U.S. taxpayer, JP Morgan was happier to take on Bear Stearns.

You might recall that while the customers of Bear Stearns lost billions of dollars last summer when two of their mortgage investment hedge funds collapsed, James “Jimmy” Cayne, the Chairman of the Board and CEO “was playing bridge and allegedly smoking pot.” And in 1998 Bear Stearns refused to join and help rescue Long Term Capital Management when they were in serious trouble.

So let me see if I understand this correctly:

1. It was OK for Bear Stearns to ignore their peers when they were in dire need…
2. It’s OK for their clients to lose billions of dollars with their failed investments.
3. It’s OK when their own employees A: Lose their jobs and B: Watch their employees’ stake in the firm plummet from US$6.3 billion to $79 million over the last year.
4. It’s OK to ‘rescue’ the company using taxpayer’s money – you remember them asking you to do that, right?
5. But it’s not OK to allow a company to fail when their top executives and the big honchos of competing firms also face the loss of their billions.

But they’re all in the same boat, they are all heavily leveraged. Bear Stearns was leveraged 32.8-to-1 with Morgan Stanley’s leverage ratio at 32.6-to-1 at the end of 2007, Lehman 30.7-to-1, Merrill Lynch 27.8-to-1 and Goldman Sachs 26.2-to-1.

No doubt the Bear Stearns bailout will ultimately leave the taxpayer on the hook for losses, and this will be yet another example of a massive fraud perpetrated by the financial elite at the expense of ordinary Americans.

No wonder people are keeping their money under their beds and investing in Costa Rica real estate…

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Written by Scott Oliver, author of How To Buy Costa Rica Real Estate Without Losing Your Camisa and Costa Rica’s Guide To Making Money Offshore.

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.