Edvenson Consulting

Subject:  The Fall of Bear Stearns

Perspective:  The Investigator's Nose Warms Up

Style:  Someone else told me this.

As past readers of my blog know, I have posed questions related to the scams in selling bad mortgages as safe securities, as well as commented on the FBI's involvement in the investigation as to who has been behind the latest dives of banks and 'financial-instrument' makers.  Now, we add a new chapter, which also affects Norway, with the 'fall of Bear Stearns.' 

First, it seems that Norway's multi-billion dollar "Oil Fund" has been invested in Bear Stearns.  Are we interested in having our oil revenues turned into . . . chocolate candy wrappers?  Well, it is just after Easter, and that would mean they were worth more than J.P. Morgan has offered for the related shares.  Luckily, it appears that the fast buck someone was going to make on this (or should I say Norwegian crown), namely J.P. Morgan, is going to have to come to them a little more slowly.  The renegotiated reality will be told in a future I cannot yet see, but I have another concern.  And that is, what is actually happening here.

In such cases, I consult a variety of sources.  This may start with posing the question to my dog, Tinkerbell, who sits at the side of my desk, basking in the sunshine pouring in the window, and caring very much when I speak about such things.  She is, in fact, interested, but has little context for responding accurately.  I then proceed to the kitchen, where I may find any number of magazines and newspapers, and thereafter to ProQuest, which I have on subscription online.  Then, it is anybody's guess:  if I hear from an old friend, I may say, 'What do you think of this?'  In this case, that is what happened. 

My concern was this:  Here we are, a lot of aging baby boomers, and a new generation of X's and Y's, all needing to get rich quick if at all possible.  Those who think they are closer to the money manage to get hold of more of it.  The money that is there (the real money that can be 'got), however, is money our mothers and fathers saved, money invested in the U.S. by foreign nations and foreignors, investing in our stable economy, so they think, and money - well, some of it, after all, has to be - money invested by baby boomers for their own retirements, either by their employers or by themselves, in their mutual funds, whatever.  And here this money is sitting, just waiting for someone with a tricky talent to get hold of it without 'paying for it,' so to speak. 

I was then corresponding with this old friend.  Let's call him Snake.  I wrote,

"Now, tell me, what did in fact happen . . . [with] these banks, or was it one?  Where everyone leaves their jobs and gets raises when things fold up.  I think this is reportable malfeasance. Don't you think these guys were actually high-tailing it out of town with the savings of several thousand Chicago baby-boomers, folks waiting to retire [etc. suggestions noted] . . . ?

And Snake replied thus:

"Bear Stearns... lessee, these guys stuffed their pockets with real money from paper profits, and, after their malfeasance had robbed shareholders, stripped jobs from honest workers, and tossed families onto the streets... now, why wouldn't I want my taxes to reward them with buyouts to "transition" BS's holdings to Chase, the guys whose stuff-own-pockets-by-looting-the-company-robbing-shareholders-destroying-jobs plans cost my last job?  After all, Dubyah only asked to give them another thirty billion dollars... y'know, so they won't feel so sad about the misery that they've created.  And, after all, $30B's only, like, two weeks of what he's spending to  . . . my . . . [ personal references deleted] in Iraq, so it's a relative bargain, I guess."

Ah, sadly, irony is creeping into even the kindest standard discourses. 

I am reminded that at the last OECD meeting in Davos, Switzerland, (January, 2008), when the subject of whether banks should be regulated by outside authorities came up, Angel Gurria, head honcho, rose and delivered his position "with shaking, outstretched arms - and a bit of Latin flair, thus:  "Don't invent new stuff.  Don't invent a new bureaucracy." ("Can Banks Self-Regulate?," Int'l Herald Tribune, Jan. 26, 2008).  So it is the bullies and the Latin lovers of the bank scene who will tell all the losers not to - um, what?  Try to get their money back?  Try to create a system of internal control that prohibits unjustifiable risk-taking masked as good investments?  Alright, Angel, then perhaps we should invent a new morality.  Would you prefer that? 

From where I sit, it looks like the few are permitted to rob the many, do so on a regular basis, and get away with it.  Auditing powerhouses are powerless to do anything about it because that simply is not what they do:  the type of auditing they do intentionally avoids some of the necessary measurements that would tell them when liquidity is too dangerously surpassed by debt obligations.  As well, the auditors cushion their 'findings' on the accounts to benefit the company, while, when the company is a bank, they have no less incentive to lend money when that is the only way they make money, even if the lending and leveraging are unjustifiable robbery  -  of good money -  for bad obligations. 

But I'm not the one who said they are criminals.  Snake said it.  Now, instead of having one question, I have two: who is going to prosecute them for it? and who is going to level the global playing field?