Crisis in Credit
Subprime fallout spreads
Potential triple dissent to test Bernanke
CHICAGO (Reuters) - Federal Reserve Chairman Ben Bernanke faces a potential mauling from three policy hawks in August that may test his apparent desire to keep interest rates steady until the smoke clears a bit more in financial markets. Full Article
Analysis and Outlook
Bailout could cripple
A Fannie Mae and Freddie Mac bailout would cripple the budget and threaten the greenback. Full Article
Fannie-Freddie face-off
Bond holders and stock holders of Fannie Mae and Freddie Mac root for different teams. Full Article
A closer look
The financial system is once again under heavy strain. Credit default swaps, or the cost of insuring debt of banks like Lehman, Barclays, and Mizuho - all raising billions of dollars in capital - have shot up, not far from the record levels seen during the credit crisis's peak back in March, when Bear Stearns collapsed. They also remain well above the low levels of early 2007, when there was almost no risk seen in the financial system.
1: Dec 14, 2006
Bear Stearns posts record earnings, touting huge profit gains from then-booming businesses advising on mergers and arranging credit derivatives, distressed debt and leveraged finance deals.
Bear stock closes at $159.96. The average price target from Wall Street research analysts covering the stock is $166.24 according to Reuters Estimates.
2: Jan 12, 2007
Bear shares close at a record $171.51 on momentum from its strong earnings report the previous month. The average price target: $174.
3: May 24, 2007
Bear shares close at $147.55, a six-week low, after Goldman Sachs slashed its quarterly earnings target for its rival investment bank, citing concern about Bear’s heavy exposure to the mortgage securitization business. The average price target: $181.73.
4: June 14, 15 & 16, 2007
On June 14, Bear reports earnings declined for the first time in four quarters on weaker results from its mortgage securities business. On the 15th, the Wall Street Journal reports a hedge fund run by Bear has suffered big losses on soured subprime mortgage investments. (A second fund with similar troubles would soon emerge.) The next day, the 15th, the Journal reports that Merrill Lynch, a creditor to the fund, seized some of its assets. The stock closes at $150.09 on the 15th, a Friday. The average target price: $181.
5: July 17, 2007
As losses from subprime mortgages begin to begin to threaten credit markets around the world, Bear Stearns informs investors in its two struggling hedge funds that the funds have “very little value” remaining. Bear shares end the day at $139.91. The average target price: $178.23.
6: Aug 5, 2007
Warren Spector resigns under pressure as co-president and co-chief operating officer, having lost the confidence of long-time CEO James Cayne for his handling of the subprime mortgage crisis. The stock closes at $113.81 on Aug 6, a Monday. The average target price: $164.29.
7: Oct 5, 2007
Prosecutors launch a criminal probe into the collapse of the two Bear Stearns hedge funds. The stock closes at $131.58. The average target price $144.17.
8: Dec 20, 2007
Bear reports its first-ever quarterly loss, driven by $1.9 billion of bad debt write downs. It also says executives will not receive annual bonuses. Bear shares close at $91.42. The average target price: $121.67.
9: Jan 8, 2008
James Cayne is replaced as CEO by investment banker Alan Schwartz. The stock closes at $71.01. The average target price; $111.36.
10: March 12, 2008
Responding to market rumors of a cash crunch at the bank, Bear CEO Schwartz goes on CNBC television and assures viewers that the firm has ample liquidity. The stock closes at $61.58. The average target price: $98.87.
11: March 14, 2008
JPMorgan, backed by the Federal Reserve, provides an undisclosed amount of emergency financing to Bear Stearns. Bear says its liquidity position had deteriorated dramatically in the previous 24 hours. The stock plunges to close at $30.85. The average target price: $93.62.
12: March 16 & 17, 2008
JPMorgan agrees on March 16 to buy Bear for $236 million, or $2 a share, representing just over 1 percent of the firm’s value at its record high close just 14 months earlier. The deal essentially marks the end of Bear’s 85-year run as an independent securities firm. Bear shares end March 17, a Monday, at $4.81 on optimism another buyer may emerge. The average target price: $2.
The U.S. housing market collapse may have helped suck the world's biggest economy into recession, and has contributed to the stock market's steep fall from record highs of only several months ago. However, forecasters at the National Association of Realtors now expect an abrupt turnaround in sales of existing single-family homes and condominiums, a key gauge of the housing market. That could lessen the drag effect on growth and provide a ballast of support for the stock market.
securities fraud charges
Bear indictment
Ex-Bear Stearns managers Ralph Cioffi and Matthew Tannin have been charged with conspiracy and securities fraud after a probe into the collapse of funds they oversaw. Full Article
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