Bear Stearns in a nutshell

Thanks to reader Greg Bacon for alerting me to another great source (yet again!).

Asia Times, The Mogambo Guru series article:

To get a "feel" for how crazy things got, Ambrose Evans-Pritchard at The Telegraph in London reports that "Bear Stearns had total positions of US$13.4 trillion. This is greater than the US national income, or equal to a quarter of world GDP - at least in 'notional terms'."

If you are like me, you gulped in horror at the revelation that this one bunch of people had made that kind of a huge, humongous, staggering load of unimaginable, unpayable commitments! More than the total income of everybody in the country!

More than the total income of everybody in the country!

So you can see how big commitments like this are dangerous, but Mr Evans-Pritchard ignores me and my penetrating, poignant analogy, and says that the problem at Bear Stearns was that through using "swaps", "swaptions", "caps", "collars", and "floors", they were able to float $13.4 trillion of this weird financial derivatives crap, and that "this heady edifice of newfangled instruments was built on an asset base of $80 billion at best".

$13,400 billion was what was leveraged on a measly $80 billion? Leveraged 167 times? Bear Stearns had less than 1% in the pot? Hahahaha!

Re-read the last sentence. Then read the whole paragraph. Then re-read the last sentence. Again. And again. Let it sink in.

"$13,400 billion was what was leveraged on a measly $80 billion? Leveraged 167 times? Bear Stearns had less than 1% in the pot? Hahahaha!"

Now, in any normal country the ex-CEO of Bear Stearns, James Cayne, would be in jail by now, getting raped daily by Bubba the Mass Murder/Jail Pimp and thinking how lucky he was to get off so lightly. In the old Soviet Union, Caney would be in the KGB Lyubyanka prison celler, watching his fingers being popped out of place one by one and steel rods being inserted under his fingernails.

In many Western Europe countries, big on stuff like "ethics" and "honor", Caney would be given a gun with one bullet in it - and the understanding that to avoid all the fuss and spare his family, to shoot himself.

But... this is the USA!

James Cayne is off to enjoy his $230 million retirement money, well earned by driving Bear Stearns into the ground, by lying, cheating and swindling his company's customers, the FED and the SEC.


I love that the concept of accountability applies only to poor people and that people who make millions have different laws and rules that apply only to them!

I love the "free" market!

I love this country! This is the bestest economic system in all the woild!