(Uni)Ted (States), Just Admit It

Anybody else getting tired of the wholesale blind eye turning to our economic spiral? Can we just admit the recession is real and is knocking at the door?

The fire sale of Bear Stearns the JP Morgan ought to make it harder to play pretend. Wall Street was appropriately stunned and global financial stocks were pummeled when trading opened after the emergency weekend deal that the Federal Reserve and US government hastily approved. Your fear that few banks are safe from deepening market turmoil are well founded.

Our president calmly stated the United States was "on top of the situation," but the sell-off intensified in the early afternoon. Financial comfort from a guy who has to take off his shoes to count beyond ten is hard to take. The Fed geared up for a deep cut in interest rates to blow money into the fragile financial system -- the latest in a series of rate cuts that has brought down borrowing costs by 2 1/4% and hammered the U.S. dollar to record lows. Hmmm...somebody just got into the market to buy a house!

Staff at Bear Stearns' Manhattan headquarters were welcomed to work on Monday by a two-dollar bill stuck to the revolving doors representing the $2 per share price that JP Morgan Chase is paying for the firm. The combination of Bear Stearns' bailout and the Fed's offer on Sunday to extend direct lending to securities firms for the first time since the Great Depression highlights just how hard the credit crisis has hit Wall Street. Beyond Bear, investors bailed from rival Lehman Bros for fear it would be next to face a cash crunch, and their shares plummeted 48% to a near eight year low. The JP Morgan shares, by contrast, jumped 7% from the deal to buy Bear for $236 million -- just 1.2% of what it was worth last year. What an bargain!

The packaging and re-selling of loans to U.S. borrowers with spotty credit is clearly the culprit in this crisis, and the effect is worldwide. As a result, organizations in the Gulf and Asia-Pacific regions have pitched in lately by buying stakes in big-name banks such as CitiCorp and brokerages like Merrill Lynch.

The sale of Bear also fucked the firm's 14,000 staff, who own roughly 30% of the company. Overnight, fat options packages turned worthless and job security vanished. But don't feel too bad - reclusive English entrepreneur Joseph Lewis who had a 10% stake in Bear is now out about $1 billion.

I can't claim to know the stock and trading world too well, but if there's ever been one thing that struck me as the biggest load of bullshit, it's the shady, arbitrary worth of companies and perception of value. That's the trouble when dickhead traders spike the prices of things like gold and oil, which hit all time highs (and were 1/5 their value just five years ago) due to that push. It's a follower psychology, and when people get convinced it's strong, the economy is strong, and when it's not it flounders - and their actions create the scenarios. When you add the speculating and lending gamble these organizations risked their finances on, the whole system starts to collapse under the weight of it's own weakness - that the support and strength of value is imaginary.

It's time to come clean about the mess we're in, which is a far better step than dinky rebate checks and pretending there's no problem.

"Ted, Just Admit It" at my alma matter, by Jane's Addiction