Tuesday, March 25, 2008

[morgan] yawn - same old motif

Yep - they certainly do that - read on

Stolen straight from Vox:

Confirmation of what I wrote about in yesterday's column, as if it was needed:

Adam Smith’s invisible hand has a puppeteer: the Federal Reserve. In case there is any confusion about who was pulling the strings behind the scenes of JPMorgan Chase’s acquisition of Bear Stearns, the curtain was lifted Monday. By raising its bid — with the grudging approval of the Fed — to $10 a share, from $2, JPMorgan exposed what had long been whispered about but no one dared to say aloud: the Fed is officially in the deal-making business.

And one question - does this constitute control economics?
"Moreover, this is a signal that the FOMC is now willing to take charge of market expectations in an attempt to avoid being forced into an undesirable steep path of monetary easing."

And are the Fed in bed with Morgan?
The Federal Reserve Bank of New York will provide 29 bln usd in financing for JP Morgan's takeover of Bear Stearns, the New York Fed announced today.

And does Morgan itself have a criminal past?

J.P. Morgan was accused of helping Enron to disguise its debt. The firm fronted money to begin LJM2, a partnership company started by Enron’s Andrew Fastow, which purchased four Enron assets. These purchases allowed Enron to record misleading positive earnings in 1999. Enron later repurchased the assets.

And has JP Morgan always been at hand in an unpreventable crisis?

Ron Chernow in his book The Death of the Banker offers this account of the 1907 Panic, "In the following days, acting like a one-man Federal Reserve system, [J. Pierpont] Morgan decided which firms would fail and which survive. Through a non stop flurry of meetings, he organized rescues of banks and trust companies, averted a shutdown of the New York Stock Exchange, and engineered a financial bailout of New York City."

And how did JP Morgan start up anyway? We'll have to dip into Mullins for this:

Corsair, the Life of J.P. Morgan,34 tells us that the Panic of 1857 was caused by the collapse of the grain market and by the sudden collapse of Ohio Life and Trust, for a loss of five million dollars. With this collapse nine hundred other American companies failed. Significantly, one not only survived, but prospered from the crash.

In Corsair, we learn that the Bank of England lent George Peabody and Company five million pounds during the panic of 1857. Winkler, in Morgan the Magnificent
35 says that the Bank of England advanced Peabody one million pounds, an enormous sum at that time, and the equivalent of one hundred million dollars today, to save the firm. However, no other firm received such beneficence during this Panic.

Crisis, drop in confidence, jittery markets and buy-ups - all in a day's work for Morgan.


  1. Good article. Have you watched Aaron Russo's (The Hollywood director) documentary on the Federal reserve? It's called America: Freedom to Fascism. Well worth a watch.


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