Want to know what nationalizing an “industry†looks like, USA-style?
http://www.independent.ie/business/world/fed-expands-role-by-aiding-jpmorgans-purchase-of-bear-stearns-1326899.html
The Federal Reserve has created a company to hold all the bad (read, value of zero dollars or less on the open market) assets that were held by Bear Stearns so that JP Morgan can buy the outstanding stock. There’s some mumbo jumbo about JP Morgan shouldering the first billion dollars in losses, but don’t be fooled – that won’t come to pass either. In any event, as Professor Joe Mason at Drexel University (props to a homie) says:
“``The Fed is so far outside the traditional bounds. It isn't innovative, it is taking a step back in time to a system of direct credit'' where the government decides ``who gets funding and who doesn'tâ€
Not that this is really different from business as usual – the Fed indirectly controlled who got funding by controlling who was considered a primary dealer. But now the mask is off – the Fed, a mish-mash of the worst aspects of private and governmental interests (on the one hand, it is not democratically accountable in any even theoretically meaningful manner, but on the other, it is the recipient of state-granted privilege) is openly and directly supplying funding to their friends and colleagues.
More importantly, this whole transaction is not structured like a traditional loan. The new Fed created company will “borrow†29 billion from the Fed, and 1 billion from JP Morgan. The company will then “send†(*&^% - even journalists who are trying to report on this stuff can’t be precise in their language, and I would bet that is because the Fed is using Newspeak about this transaction) 30 billion to JP Morgan in exchange for the toxic assets that sank Bear Stearns.
The assets at stake here – the Bear assets – are the equivalent of a lit piece of dynamite. You can easily assume that there are other lit sticks out there on wall street as well. You are seeing the beginning stages of a game like musical chairs. Wall street and big finance are all dancing around hoping to tie their pieces of dynamite to the chair occupied by people whose assets and income are denominated in dollars before the music stops. Sometimes, the dynamite will blow up before they can finish tying it, and one of them, like Bear Stearns, will be caught. This process is essentially a winnowing of the ruling class – power, money, and influence is being consolidated, with the lesser lights essentially getting a one way ticket out.
Don’t fret for the lesser lights, though. Notice how last week JP Morgan’s offer for Bear Stearns was for $2 a share? And yet sellers were having no problem selling Bear stock for approximately $4 a share. By the end of the week, there was some speculation about strange trades occurring, and sure enough, JP Morgan is upping its bid to $10 a share this
week.
What happened was that insiders (probably those who really took a bath when Bears’s stick of dynamite blew) knew the price would go up, and so were willing to buy as much Bear stock as possible to book the profit. Insider trading at its finest, but you can rest assured the SEC won’t even investigate, because, well, regulation is only for the commoners.
So the lesser lights get bought off, and they’ll slink away quietly into lives of relatively powerless opulence, instead of fighting all the way down.
It is no longer (I’m not sure when it really was, but that’s another question entirely) the case that the U.S. financial system can be described as a market. It is now akin to Soviet committee meetings, where profits and losses are determined by political power and personal relationships to it.
I’m happy to report that 
