By: pelicanbrief114
19 May 2008, 09:44 PM EDT
Msg. 721840 of 723348
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Who Knew "What"
And "When"?
The Anatomy of the Rape and Pillage by the "Cartel and Their Brethren"!!
Bear Stearns Buy-Out... 100% Fraud
This article is about how Bear Stearns stock was artificially collapsed so that illegal insider traders would make billions and J.P. Morgan would be paid $55 billion of US tax payer money to shore up themselves and buy Bear Stearns at bankruptcy prices.
Massive buying of puts and shorting stock in Bear Stearns
On March 10, 2008, the closing price of Bear Stearns
was 70. The stock had traded at 70 eight weeks earlier.
On or prior to March 10, 2008 requests were made to the
options exchanges to open new April series of puts with
exercise prices of 20, and 22.5, and a new March series with
an exercise price of 25.
Their requests were accommodated and new series
were opened for trading March 11, 2008.
Since there was very little subsequent trading in the
calls with exercise prices of 20, 22.5 or 25, it
is certain that the requests were made with the
intentions of buying substantial amounts of the puts.
There was, in fact, massive volumes of puts purchased
in those series which opened on March 11, 2008.
For example: between March 11-14 inclusive, there
were 20,000 contracts traded in the April 20s, 3700
contracts traded in the April 22.5s, and 8000 contracts
traded in the April 25s. In the March 25s, there were
79,000 contracts traded between March 11-14, 2008.
Question: Why did the options exchanges not open the
far out of the money puts for trading the first time that
Bear Stearns stock hit 70, when the April and March options
had far more time to expiration? Certainly if the requesters
were legitimate hedgers or speculators, their buying the
March and April puts with 2 and 3 months to expiration
was more reasonable.
Answer: The insiders were not ready to collapse the stock and
did not request the exchanges to open the new series when Bear
Stearns first hit 70..
Second Request and Accommodation
On or prior to March 13, 2008, an additional request
was made of the options exchanges to open more
March and April put series with very low exercise prices.
These new March put options would have just
five days of trading to expiration. The exchanges
accommodated their requests, knowing that the intentions
of the requesters were to buy puts. They indeed bought
massive amounts of puts. For example the March 20 puts
traded nearly 50,000 contracts (i.e. contracts to sell 5
million shares at 20). The March 15s traded 9600, the March
10s traded 13,000 and the March 5s traded 6300 all on
March 14 (the first day of trading of the new March series).
The introduction of those far-out-of-the-money put series
in the April and March months immediately before the crash
provided a vehicle whereby extreme leverage was available
to the insiders. In other words if an insider had $100,000 and
he knew that Morgan would buy Bear Stearns at 2, he
could make 5-10 times more on the $100,000 by buying the
newly introduced March puts. This is so because the soon to
expire far out-of-the-money puts were far cheaper than the
July or October out-of-the-money puts. And that is why the
illegal inside traders requested the exchanges to introduce
the far out-of-the-moneys just days before the crash.
But this scenario has serious implications. This means
that the deal was already arranged on March 10 or before.
That contradicts the scenario that is promoted by SEC
Chairman Cox, Fed Boss Bernanke, Bear CEO Schwartz,
Jamie Dimon of J.P. Morgan (who sits on the board of
directors for the New York Federal Reserve Bank) and
others that false rumors undermined the confidence in
Bear Stearns making the company crash, notwithstanding
their adequate liquidity days before.
I would say that the deal was arranged months before
but the final terms and times were not determined until
maybe March 7-8, 2008.
On March 14, 2008, the April 17.5s, the 15s, the 12.5s and
the 10s traded 15,000 contracts combined. Each put
gives the right to sell 100 shares. So for example,
these 15,000 April puts gave the purchaser(s) the
right to sell 1.5 million shares at prices between 10
and 17.5. Those purchasers expected to make profits
on 1.5 million shares because they knew the deal was
coming at $2.00.
That is the only plausible explanation for anyone
to buy puts with five days of life remaining with strike
prices far below the market price.
So there were requests, during the period of
March 10-13, to the exchanges to open the March
and April series for buying massive amounts of
extremely out-of-the-money puts, which were
accommodated by the options exchanges. Did the
Exchanges aid and abet the insider trading scheme?
We are not able to have a strong opinion on that idea.
Media statements of adequate liquidity.
However, Reuters, on March 10, 2008 was citing
Bear Stearns sources that there was no liquidity
crisis and that there was no truth to the
speculation of liquidity problems.
And none other than the Chairman of the Securities
and Exchange Commission on March 11, 2008 was
stating that "we have a good deal of comfort with
the capital cushion that these firms have".
We even had the "mad" Jim Cramer proclaiming on
March 11, 2008 that all is well with Bear Stearns and
that the viewers should hold on to their Bear Stearns.
And on March 12, 2008, Alan Schwartz CEO of Bear
Stearns was telling David Faber of CNBC that there
was no problem with liquidity and that "We don't see
any pressure on our liquidity, let alone a liquidity
crisis".
The fact that the requests were made on March 10
or earlier that those new series be opened and those
requests were accommodated together with the
subsequent massive open positions in those newly
opened series is conclusive proof that there were
some who knew about the collapse in advance,
while Reuters, Cox, Schwartz and Cramer were telling
the public that there was no liquidity problem.
This was no case of a sudden development on the
13 or 14th, where things changed dramatically making
it such that they needed a bail-out immediately.
The collapse was anticipated and prepared for, even
while the CEO of Bear Stearns and the SEC Chairman
of the SEC were making claims of stability.
What was the reason that Cramer, Cox and Schwartz
were all promoting Bear Stearns immediately before
its collapse. That will be speculated upon for years to come.
Cramer has admitted that "truth" was not his friend
and that he manipulated stocks to influence investors
behavior. Was this one of his acts?
But no apologies from Cramer as he claims now that
he was referring to keeping money in Bear Stearns Bank
not in Bear Stearns stock.
Proof of Insider Trading:
To prove the case of illegal insider trading, all the
Feds have to do is ask a few questions of the persons
who bought puts on Bear Stearns or shorted stock
during the week before March 17, 2008 and before.
All the records are easily available.
If they bought puts or shorted stock, just ask them why.
What information did they have access to which the
CEO and the SEC did not have? Where did they get the
info? Why aren't Cramer and Cox, Dimon, Bernanke,
Geithner, Paulson, Faber and Schwartz subject to a bit of
prosecutorial pressure to get to the bottom of this.
Maybe the buyers of puts and short sellers of stock
just didn't believe Reuters, Cox, Schwartz, Cramer and
Faber and went massively short anyway, buying puts that
required a 70% drop in a week. Maybe they had better
information than Schwartz or Cox. If they did, then that's
a felony, with the profits made subject to forfeiture.
April 4, 2008 Congressional Hearings on the
Bear Stearns Bail-out.
I watched both sessions and drew the following
conclusions:
In the first session there were the following witnesses.
Bernanke of the Federal Reserve Board, Cox from
the SEC, Geithner representing the New York Reserve
Bank and an incidental player Mr. Steel from the Treasury.
The only Senators that seem to be willing to attack
these bankers were Bunning, Tester, Menedez and
Reed.
All the rest were useless and very respectful.
Absurdities
All witnesses did their best to keep their stories
consistent but they did slip up a bit.
They all agree that the bail-out was necessary without
any proof that it was.
They all agreed that what caused the cash liquidity to
dry up within one day was the rumor mongers.
Apparently it is claimed that some people have the
ability to start false rumors about Bear Stearns' and
other banks liquidity, which then starts a "run on
the bank" . These rumor mongers allegedly were able
to influence companies like Goldman Sachs to
terminate doing business with Bear Stearns,
notwithstanding that Goldman et al.
believed that Bear Stearns balance sheet was in good
shape. (Goldman between March 11-14 warned their
average customers that Bear Stearns stock was "hard
to borrow" for shorting due to the fact that other
customers had used up all of the stock available for
borrowing for short sales) .
That idea that rumors caused a "run on the bank" at
Bear Stearns is 100% ridiculous. Perhaps that's the
reason why every witness were so guarded and hesitant
and looked so strained in answering questions.
Loans to J.P. Morgan total $55 billion from FED
The Private New York FED lent $25 billion to Bear Stearns
(described as the primary facility by James Dimon)
and another $30 billion to J.P. Morgan (described as the
secondary facility by James Dimon). So the bail-out cost
was $55 billion not the $30 billion that is promoted. This
was revealed at the second session of the Senate hearings in
a James Dimon response to a question from Senator Reed.
Who gets the $55 billion? J.P. Morgan received the money on a
loan pledging Bear Stearns assets valued at $55 billion.
$29 billion is non-recourse to Morgan.
Effectively the FED received collateral appraised by Bear
Stearns at $55 billion for a loan to J.P. Morgan of
$55 billion. That's a loan to value of 100%.
If the value of the secondary facility of $30 billion
($29 billion of which is non recourse) is worth only
$15 billion when all is said and done, then J.P. Morgan
has to pay back only $1 billion of the $30 billion received
and keeps the $14 billion the the Fed loses. If the $25
billion primary facility is worth only $15 billion when all
is said and done, J.P. Morgan has to pay $10 billion of
the $25 billion received. If J.P Morgan can not pay, then
the Fed loses the $10 billion.
If after all is said and done, the $25 billion primary
assets or the $30 billion secondary assets are sold for
more that $25 billion or the $30 billion respectively, the
difference goes to J.P. No matter how you cut it,
J.P. Morgan wins.
If the $55 billion assets turn out to be worth only $20
billion when all is said and done, J.P. Morgan owes $1
billion on the $30 billion and the difference between
$25 billion and the value received on the primary facility.
The best the FED can do is get their money back with
interest and the worse they can do is lose
about $25 -$40 billion.
The FED would have been far better to just buy the
assets at Bear's and J.P.Morgan's valuation.
-----------------------------------------------------------
The question arises:
Why didn't the FED just make the $55 billion loan to
Bear Stearns directly? The FED received Bear Stearns
assets valued by Bear Stearns as its only collateral for
the 100% loan. I am sure that Bear Stearns would
have guaranteed the full $55 billion and would have
advanced more collateral and accepted a 90% loan
to value. Everything would have been just fine
for Bear Stearns and the FED would have had a
better deal. But the Bear Stearns stock would have
gone up and all short stock sellers and all put buyers
would have massive losses instead of massive gains.
The bail-out is a great deal for J.P. Morgan, and the
illegal insider short sellers got a great deal.
Bear Stearns stock holders and employees got
a very bad deal and the sellers of puts sustained
large losses.
This shows, in my view, that J.P. Morgan and the FED
were in collusion with the short sellers and put buyers.
Welcome to the "Pimps and Parasites" in Pinstripes!!!!
Protect and Govern Thyself!!
Got Gold/$ilver/Hard A$$et$?
Got CMKX? :-)
Have a Wonderful Evening!!!!
4NS
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