Wait for what?

Wait for it to go up?

Still gloating? Remember, buy low and sell high.
 

Maybe the worst is over and it's on the rise. Hats off to London Road for bravery.

Yeah.. good call.

THAT'S what I'm waiting for.
 

Just got the tail end of the news on BSC. It said JPM is to buy it less $30/share. Could this be right? 

Solly

London:

JP Morgan just bot BSC for 2 bucks a share. 

Congratulations on your purchase.  You have managed to catch the proverbial "Falling Knife."

~Mr. Purrington

With the news of $2 a share buyout of BSC, all financials will suffer. There may be some fire sales today.

This thing is snowballing. Every highly leveraged financial is suspect and will see their ability to raise funds drying up, which may force more of them into the mouths of bigger, stronger fish, it's only a safe haven until the bigger fish chomps down. 

London,

Are you gonna buy Lehman today? It's down to $25 and some change.....so far. 

If you bought BSC at $70, buy some more at $2 to average down (or up).

You cannot lose with "buy and hold" and DCA.

the NYSE still has BSC listed

The shareholders at BSC still have to approve the deal.
Also BSC may find a different buyer to buy at a higher price.

Whatever it is, BSC is too risky to buy or short sell. 

I lost my a** a year ago with a similar deal.  I sold aftter stock had gone from 70 to 10.6.  3 months later all common and preferred div had been stopped & it was selling at 3; 6 months after that it was at 1.10 on the pink sheets.

Best of luck.

Lets hope that this thread marks the end of cocky, arrogant posters like the one who started this thing. Just how "stupid" (as the original poster suggested) was anyone who didn't follow their advice? I'd extend this hope to the "penny stock mavens" who sometimes haunt these boards, attacking anyone who disagrees as a "penny stock basher" or worse.

(long - civil discourse)

Bear is at $6 now. 

If you listen to me average down yesterday (at $3), you are up 100%.

After that you made the remark that it was too risky to buy or short, xeonogear. (yeah, I know you were being facetious).

Besides, I'm the one that predicted the Dead Cat Bounce, LOL 

Putting in a stop-loss order on BSC Friday near $30 share would not have helped, and this shows one of the weaknesses of stop loss orders. The stock opened near $3 on Monday, a gap down. Shareholders really got creamed here. Only the purchase of puts would have helped, but at the time, they looked expensive.

OK Guys...BSC was not the best call I've ever made but what I put into BSC was/is less than 0.60% of total portfolio..not even 1%.  Although, in total I am overweight financials...I like them and this market is not going to recover to its October 9, 2007 highs and go from there without the financials participating.  And we will get back to 10.09.07 highs this year and it will happen quickly. This whole "mark to market" business for investment banks is crazy in accounting terms as 97% of homeowners pay their mortgages on time. 

Also, doing away with the "uptick rule" when shorting a stock has increased the voiltity in the market; it has turned the market into a trader's market rather than an investor's market.

Plus, JPM is not going to pay cash for the BSC shares but pay out in JPM shares, which is completely OK with me, I have no problem with this.

Also, I have a fellow graduate student friend who works in Asset Management at BSC.  I don't even wish to think about him being involved in getting BSC where it is today...don't wish to go there.

So, in paper terms I've lost money on my BSC stock but given that I will get JPM stock in exchange, I think in fiive years the pain will be gone.

$10

Deal allows JPM to increase their share of BSC to 39.5% before the shareholders vote. Pretty smart move by JPM. 

$10

Deal allows JPM to increase their share of BSC to 39.5% before the shareholders vote. Pretty smart move by JPM. 

[/quote]

It makes you wonder who the board of directors are acting for. People always talk about BOD giving executives unwarranted compensation packages but talk about giving away the company to selected parties. The BSC board somehow manages to give away 40% of the company without a shareholder vote or any independent fair value evaluation to a preferred party (it was offered to one single party: JPM). And all this with the Federal Reserve putting in $29 billion for questionable assets.

When Adam Smith talked about shady deals in smoky rooms, this kind of fits the bill--except government is colluding with the players as well. The Federal Reserve gets snookered by Jamie Dimon of JPM, who manages to unload possibly the worst assets to the FedRes (although now he says he is willing to pick up the first billion in losses), while picking up BSC at some arbitrarily low value, while being helped the BSC BOD. All this without any shareholder input whatsoever!

How many of you would have thought it possible for a company to issue shares to a preferred party and give up 40% of the company without a shareholder vote. I sound angry but I have no position in BSC. It just makes me feel bad how shareholder interests can be swept away by Wall Street insiders (Jamie Dimon in this case), while offloading most of the risk to the government.

 Who knows how much BSC is worth (could be zero) but at least the shareholders should be given a say...

I don't think you have seen the last of the Bear Stearns saga.

Shareholders have absolutely no rights when a company goes bankrupt, this is a de facto bankruptcy, without the paperwork. BSC lost liquidity and couldn't pay it's debts, without the government stepping in all liquidity in their markets would have dried up (the domino effect) and that's the Fed's job, keep liquidity in markets.

And yeah, they punished BSC's stockholders, 30% of which are employees who caused the mess to start with. Are they willing to give back all their bonuses and salaries for their risk taking? Don't think so. But, it's still less of a punishment than if the Feds had allowed BSC to go belly up.

BSC's BOD had no choice. Be swallowed or die. It was a self-made predicament. 

Shareholders have absolutely no rights when a company goes bankrupt, this is a de facto bankruptcy, without the paperwork. BSC lost liquidity and couldn't pay it's debts, without the government stepping in all liquidity in their markets would have dried up (the domino effect) and that's the Fed's job, keep liquidity in markets.

And yeah, they punished BSC's stockholders, 30% of which are employees who caused the mess to start with. Are they willing to give back all their bonuses and salaries for their risk taking? Don't think so. But, it's still less of a punishment than if the Feds had allowed BSC to go belly up.

BSC's BOD had no choice. Be swallowed or die. It was a self-made predicament. 

[/quote]

I second this and I don't feel one bit of pity for most of the employees, since they not only made this mess to begin with, most will keep their jobs.  The employees I do feel sorry for are the low-level employees, like the secretaries, who not only did not cause the mess, likely won't be keeping their jobs.

The systemic catastrophe that would have happened had BSC gone bankrupt was avoided.  If they had gone bankrupt, the panic would have snowballed and there would have been runs on other over-leveraged investment banks.  The financial system is very interconnected not only in the US, but across the globe.  When a big player falls, it has implications elsewhere.

When these I-banks get so big that their failure necessitates government intervention at taxypayer expense or risk a system wide crisis in our banking system, there needs to be more regulation.

First, Bear Sterns gives money freely to home buyers. Then tells everyone that it passes the risk to the "stupid" foreigner investors.

Guess what, Bear goes bankrupt. Who is "stupid" now?

Last time I checked, Bear Stearns wasn't bankrupt. If Bear Stearns was bankrupt, I would have less of an issue than now. A non-bankrupt company belongs to shareholders last I checked. It's ridiculous for you to argue that shareholders somehow shouldn't have any rights.

I also find it hard to believe why someone would be paying more than $1 billion for a company that you claim is bankrupt. Math is not my strong suit but something doesn't add up.

There is no other way to say it: Bear Stearns was looted by JPM, while being abetted by the Federal Reserve. Somehow JPM became the preferred party of the Federal Reserve, which put up $29 billion of taxpayer money while giving away the company to JPM and no one else. None of you may believe it but the Federal Reserve made a horrendous mistake by legitimizing the looting of a company outside of bankruptcy courts. I'm generally a defender of the Federal Reserve but Ben Bernake made his first huge mistake on the job.

 Lest all of you forget, shareholders own a company. Not the Federal Reserve. Not the US government. Not the big bank on the block. Not the bondholders. Not the customers.

They'll get their vote.

Frankly, I wish the Feds and JPM had let them declare Bankruptcy. Teach Wall Street a lesson. Even if it would have damaged the rest of us enormously. Oddly though, shareholders get no vote on whether a BOD declares bankruptcy or not. 

The Invisable Hand aka Bernanke's hand

That hand you see is Bernanke's hand in your pockets.  The FED (aka the tax payer) guaranteed the first $30 billion of this deal.  I also see the offer has been raised to $10/share. 

This whole thing seems a bogus to me.  A closed door deal with the FED calling the shots.  How's that for free markets.  No other offers taken.  Guaranteed with FED money.

Looks to me like the FED panicked, and maybe they had good reason to.  Their thinking had to be if BSC goes down, lots of other stuff goes with it and maybe the whole system.   It just shows me how unstable the whole system is and how close to imploding it must have come.   Now the FED is loaning money to the investment "banks".  Freddie and Fannie have had their collateral requirments reduced so they can buy more mortgages.  TAF,  etc are loaning money to banks.  etc etc etc.  Looks like panic to me. 

JPM will come out of this smelling like a rose if they survive..........

Every thing the FED is doing seems to be adding debt (lower interest rates, taking really doggey Mortgage backed securities as collateral for long term loans etc.  .  My advice is when you find yourself in a hole, quit digging.  

They'll get their vote.

Frankly, I wish the Feds and JPM had let them declare Bankruptcy. Teach Wall Street a lesson. Even if it would have damaged the rest of us enormously. Oddly though, shareholders get no vote on whether a BOD declares bankruptcy or not. 

[/quote]

I'm not a BSC shareholder but my problem is really with the board of directors. It's amazing to me how they can give away around 40% of the company to JPM under the guise of a better deal ($10 instead of $2). Admittedly they probably couldn't grab $29 billion from the federal reserve without doing something weird like this, but it steps all over shareholders. The BOD even had to break NYSE regulations (these don't matter much; it's just an exchange) and skirt Delaware regulations which try to block cases like this, where the BOD gives away 40% of the company to JPM in order to seal a vote.

There is something really fishy going on behind the scenes... Interestingly, the CEO of Wells Fargo is now trying to get the FedRes to facilitate them trying to loot other distresses financial companies.

 BSC shareholders probably woudl have ended up with nothing (BSC is highly leveraged) but their rights as shareholders were ignored by the BOD.

They'll get their vote.

Frankly, I wish the Feds and JPM had let them declare Bankruptcy. Teach Wall Street a lesson. Even if it would have damaged the rest of us enormously 

[/quote]

Eagle, if you wish to have a depression, then BSC should have been bankrupt and not saved by the Fed. But the Fed will not allow a depression, therefore they will bail out any bank/firm in trouble of smelling bankruptcy

I guess many of you just don't understand the derivative chain reaction??

That hand you see is Bernanke's hand in your pockets.  The FED (aka the tax payer) guaranteed the first $30 billion of this deal.  I also see the offer has been raised to $10/share.  [/quote]

The deal was modified so that JPM picks up the first billion in losses, while the FedRes picks up the rest of the $29 billion... still almost the same though... 

 [quote]This whole thing seems a bogus to me.  A closed door deal with the FED calling the shots.  How's that for free markets.  No other offers taken.  Guaranteed with FED money.

Looks to me like the FED panicked, and maybe they had good reason to.  Their thinking had to be if BSC goes down, lots of other stuff goes with it and maybe the whole system.   It just shows me how unstable the whole system is and how close to imploding it must have come.   Now the FED is loaning money to the investment "banks".  Freddie and Fannie have had their collateral requirments reduced so they can buy more mortgages.  TAF,  etc are loaning money to banks.  etc etc etc.  Looks like panic to me. [/quote] 

I'm in the disinflation/deflation camp so I'm cool with the FedRes injecting liquidity. My understanding is that so far nearly all of it is sterilized (i.e. no net increase in money supply) so it won't cause inflation. The taxpayers may take losses but I'm not sure about that either. The Bear assets are likely very risky (it's basically the lower tranches of mortgage debt) but the other assets that the FedRes is accepting likely won't lead to big losses.

My problem is with the way the Bear Stearns Board of Directors were behaving and how the Federal Reserve favoured one party: JPM. The BSC board somehow managed to issue shares to JPM for almost 40% of the company without shareholder approval. This is highly unethical in my eyes!!! The BOD is supposed to represent shareholders! It is in poor taste for the BOD to issue huge amount of shares and give it to a preferred party in order to complete a takeover.

It's also bizarre that the Federal Reserve was willing to wipe out equity holders (this is ok--shareholders take the risk) but make the bondholders whole (BSC bondholders should also take losses). I'm actually shocked that the Federal Reserve will save the bondholders and not the stockholders. It doesn't make any sense at all.

[quote]JPM will come out of this smelling like a rose if they survive.......... [/quote]

It's probably conincidental but do keep in mind that JPM has the largest derivatives book on the Street. They are not leveraged like the investment banks, and most of their derivatives are likely "safer" stuff (like interest rate and currency derivatives) but you just wonder.

[quote]Every thing the FED is doing seems to be adding debt (lower interest rates, taking really doggey Mortgage backed securities as collateral for long term loans etc.  .  My advice is when you find yourself in a hole, quit digging.  [/quote]

 Lowering rates is fine with me. Remember, some people out there are saying that we have a real estate bubble half the size of Japan's (although Japan's big bubble was in commercial real estate while the US one is in residential; also Japan had a huge stock market bubble whereas USA doesn't). Unless you want to end up in a massive deflationary recession or depression like Japan did, cutting rates is the right thing to do. One of the biggest mistakes the JCB did was to raise rates in early 90's--likely under political pressure. It was a disaster of epic proportions. Not only did it further aggrevate the real estate and stock market collapse, it also bankrupted many of the banks. The FedRes is right in steepening the yield curve and letting the banks make some money, while some of the pressure is removed frmo the consumers as well.

Having said all that, it's not the job of the FedRes to bail out anyone. They should facilitate liquidations but not favour select parties and offer free money. Sadly, they did just that with the Bear Stearns case. To make matters worse, the FedRes also indirectly trampled shareholder rights. If Bear Stearns faced an orderly bankruptcy or if it was offered to the highest bidder, they would have avoided most of the ethical questions. As it stands now, it looks like the FedRes is in the backpockets of JPM and loves to help board of directors who ignore shareholder rights!!!

They'll get their vote.

Frankly, I wish the Feds and JPM had let them declare Bankruptcy. Teach Wall Street a lesson. Even if it would have damaged the rest of us enormously 

[/quote]

Eagle, if you wish to have a depression, then BSC should have been bankrupt and not saved by the Fed. But the Fed will not allow a depression, therefore they will bail out any bank/firm in trouble of smelling bankruptcy

[/quote]

ITA - the chain reaction that would have ensued would have been historical and devastating.  The system is far too interconnected to let a big player fail.

Sucks if you're a BSC shareholder, but I am not so I am glad it ended the way it did.

If BSC failure teaches us anything at all it is - diversify and do not keep a large stake in your employer's stock.

Sucks if you're a BSC shareholder, but I am not so I am glad it ended the way it did.

If BSC failure teaches us anything at all it is - diversify and do not keep a large stake in your employer's stock.

[/quote]

I'm not in financial, and have not been in financial for months. I'm the type of investor that buys heavy in a sector early on in the bull and just ride it. I bought heavy in commodities, so you can imagine the fat gains I got. And not, I know we're not at the end of the commodities bull, as some might HOPE and claim in these forum.

I don't approve what the Fed is doing about bailing out financial firms in trouble. I'm sure BSC is and will not be the only one that the Fed will bail out. Oh and those loans the Fed says are for only 30 days, I bet they will loan this money for ever if necessary and keep renew the terms indefinitely. The Fed will just not allow bankruptcy, I think in the short run it'll work, in the long run it'll come back to hunt them

JMO

[quote user="openhurdle"]

I bought heavy in commodities, so you can imagine the fat gains I got. And not, I know we're not at the end of the commodities bull, as some might HOPE and claim in these forum.

[/quote]

I don't think we are at the end of the secular commodities bull market but the short-term bull market may have some downs once the fed takes inflation by the horns.

Seriously, what was the thought process in your mind, to invest in this stock at the start of a financial crisis?  Did you know something about the company that no one else knew?  Was there some point of analysis that you had made, which was clearly superior and different than that made by practically anyone else?  Or did your ego just tell you that this could not fail? 

When I invest, I act on situations where I can see a bit more than conventional wisdom, where I can see absolute or (at least) relative value.  If I am just buying something because I am just oh-so-certain of my infallibility, it is just a gamble. 

In my opinion, the key distinction between investing and gambling is that the former is an exercise of reason over ego, and the latter is visa versa.
 

None of you may believe it but the Federal Reserve made a horrendous mistake by legitimizing the looting of a company outside of bankruptcy courts. I'm generally a defender of the Federal Reserve but Ben Bernake made his first huge mistake on the job.

[/quote]

I respectfully disagree.  The Fed did exactly what it needed to do. 

Had the Fed not acted quickly, the market would have dropped precipitously Monday morning.  We're talking down 20%--or more.  Across the board.  Everyone gets hurt.  The innocent as well as the guilty.  Some have suggested it would have made 1987's Black Monday look like a picnic.

To quote someone (Star Trek's Spock, I believe): The needs of the many outweigh the needs of the few, or the one. 

But hey, if that kind of major market event doesn't bother you, then yeah, the Fed did the wrong thing.

William 

To somehow try to prove that the Fed "screwed" the Bear shareholders with this deal is just hilarious to me.  The Bear was a walking dead man, facing unfillable margin calls.  Without the Fed intervention, they would have been liquidated.  Period. 

The only reason the shareholders got anything AT ALL is because the fed financed $30 billion of crap, and because the Fed was trying to prevent panic.  If the market would have decided the matter, the shareholders would have gotten ZERO. 

In a sense, that is actually a positive of being an equity holder.  You can't lose more than zero, and this company's real net worth was a heck of a lot less than zero.  When you can't pay your bills, you get liquidated out for a very low price.  That is how it works.  "Enterprise value" or other such intangible valuations are meaningless.  THAT is why it is very dangerous to buy equity in a company circling the drain.  Duh...!?

And of course the debt-holders are in a preferred position!  KB, the fact this confuses you indicates you have no idea what you are doing, investing in any equity position.  Owners have last claim on all assets.  Period. End of story.  If the equity holders were made "whole" (and I have no idea how one could even determine this), but bond holders took a loss in collection, all hell would have broken loose. 

Sigh...  maybe this is why some of you eagerly ran into this buzz-saw.  You not only did not have any special insight on the situation, you just did not understand the rules of the game at all.  Scary...really!

KB, the fact this confuses you indicates you have no idea what you are doing, investing in any equity position.  Owners have last claim on all assets.  Period. End of story[/quote]

Alex,

Now OBrian will attack you defending poor Koala, claiming you're like a dog that barks with no substance as to why you bark... You know, Koala has a new lawyer in these forums... 

Of course OBrian won't attack you; he just wanted to get even with me. You know, I've been disagreeing lately with his positions

Alex,

Actually, it's 29 billion of crap, as JP Morgan is on the hook for the first billion.  Also, an orderly sale of the "crap" could fetch more than what the Fed paid.  This according to the Fed's own testimony today.

Seriously, what was the thought process in your mind, to invest in this stock at the start of a financial crisis?  Did you know something about the company that no one else knew?  Was there some point of analysis that you had made, which was clearly superior and different than that made by practically anyone else?  Or did your ego just tell you that this could not fail? 

When I invest, I act on situations where I can see a bit more than conventional wisdom, where I can see absolute or (at least) relative value.  If I am just buying something because I am just oh-so-certain of my infallibility, it is just a gamble. 

In my opinion, the key distinction between investing and gambling is that the former is an exercise of reason over ego, and the latter is visa versa.
 

[/quote]

Good advice. Worth repeating, so I did. 

lol!  If the Fed (or the administrator) gets more than face for this $30 billion in crap, then I will eat my hat. 

Here is the general structure as I understand it:

(Bloomberg)  The assets will be placed in a Delaware corporation set up by the New York Fed. BlackRock Inc. will attempt to sell the assets to pay back the Fed and JPMorgan. The first $1 billion of losses, if any, will be charged to JPMorgan, and the remainder go to the Fed.

From other sources, it appears that the Fed can in theory make money from this from accrued interest, and any possible gains on sale.  The former is clear-cut, and the latter will effectively be deemed "interest" to skirt any ownership issues.  As I see this, it is basically a "non-recourse" loan to JPM, with recourse being to the pool of securities...not JPM after the first $1.0 billion.  I have one unconfirmed source saying these are "10 year loans".  I have no idea what that means yet. 

Blackrock is not going to sell it now, that would be insane.  My understanding is that this is MBS and "related items" (shudder), so when will there be a favorable market?  2011-2012?  Ever?  In the meantime is any / all of this performing as agreed?  If not, it needs to be discounted down from face amount, which likely means a baked-in loss.  What would you pay for a nonperforming loan?  Ya think Bear wrote down the assets before this deal was made?  I bet not!  We know the Fed has no real idea what they bought, as they got an asset manager after this deal was cemented  We do know that JPM passed on holding these...right?  Do you think JPM just randomly picked assets for this pool?  Oh no!  They probably picked the BEST ones for the Fed, because they are on the hook for a whole $1 billion!  lolol...

The Fed is as silly as anyone that bought Bear a few months ago, if they think gain on sale is going to happen.  Yes, let's think about the potential gain!  Let's not remember that we 1) have no idea what we have in this pool, 2) have no idea when the market will be favorable to sell what we have effectively "bought", and 3) the current owner of the company has given us a nominal "first loss" participation after passing on effective direct ownership themselves.  lol...

Put lipstick on that wart-hog and take it out on a date if you want.  But to me it is still 30 billion of crap (rounded up), and the Fed owns it.   

As for the rounding error, the first billion is a nod in the direction of risk sharing, and that is about it. 

I have a deal for you.  I will buy LA for practically nothing.  As for the toxic waste dumps, sewage and pending lawsuits equal to 30 billion, you take that.  Just to be nice, I will take the first billion loss if that becomes a problem for you.  As for the rest of the city, its mine.  

What a deal!  Think of the gains!   

lololol....

Well...  My cynicism of the $30 billion in assets appears to have been excessive.  Sorry, should have kept my own counsel until I knew the specific terms of the deal.  We will see about a gain.  Interest income is reasonable.  The probability of a gain will be determined by future conditions of the mortgage and housing market.  At this stage, who knows?  But it does not look like a terrible deal for the Fed. 

Here is the Fed New York description of the deal. 

What reassures me most of all is that the Fed picked the $30 billion in assets, using fairly reasonable parameters.  That is, investment grade securities, performing loans, etc.  Also, the value of the $30 billion pool was supposed to be determined by market value.  So if that is not "mark to model" then I think its safe to say that the initial collateral value is fairly conservative. According to the comments, the Fed will be required to adjust these annually.  So I guess we will see how things go a year from now. 

It is a bit of a strange deal to me, in that I don't understand why it was $30 billion that JPM wanted in this pool, but I guess it makes sense to someone. 
 

And of course the debt-holders are in a preferred position!  KB, the fact this confuses you indicates you have no idea what you are doing, investing in any equity position.  Owners have last claim on all assets.  Period. End of story.  If the equity holders were made "whole" (and I have no idea how one could even determine this), but bond holders took a loss in collection, all hell would have broken loose. 

[/quote]

Can you read Alex? Where did I imply that debtholders have the same claims as shareholders?

My point is that, if the Federal Reserve was going to bail out Bear Stearns, it should NOT have bailed out bondholders any more than the shareholders. It sets a bad precedent when the goverment makes whole those who facilitated the risk-taking. The FedRes should not reward all the parties that took the risk in the first place (this basically means management, shareholders,and bondholders).

The FedRes made a mistake here in my eyes. Those who doubt it will come around to my view in a few years. Even now, many who were in favour are coming around to the view that the FedRes lost a lot of credibility after the takeover price was raised by JPM. If there is a run on Lehman Brothers, you will see why this was a huge mistake to begin with.

So to sum up, the FedRes should never reward the risktakers, which is basically mangement, shareholders, and bondholders. It also shouldn't favour one party (JPM in this case). I really don't see how anyone can justify the FedRes offering up to $29 billion in losses to JPM and not anyone else.

[quote user="WilliamJ"]I respectfully disagree.  The Fed did exactly what it needed to do.  [/quote]

 I don't really have a problem with the FedRes preventing the collapse. My problem is that they are clearly showing favouritism to one party (JPM) and bailing out the bondholders who enabled Bear Stearns to take the risk in the first place.

I would have less of an issue if the (potential) $29billion benefit was divided across a consortium of banks or something. That's what happened to LTCM back in 1998.

A key component of Bear Stearns' problem is their 30x leverage which only existed because bondholders were willing to enable such debt issuance. By the FedRes bailing out the bondholers, this seemingly excessive leverage is still going to happen again.

Although I don't think it will happen, if Lehman Brothers (the #2 player in the questionable mortgages) collapses then the FedRes is going to have all sorts of problems due to what they did with Bear Stearns. I don't think LEH will fail given that the Fed window is open to investment banks right now but you just never know...

Yes, I know how to read.  The mistake I made was giving you more credit than I should have.  I assumed you knew the difference between an owner and a creditor, and what that means in terms of assumption of risk.  However, you do not seem to understand this basic concept of finance.    

As anyone who has taken an elementary course in finance or accounting would know, the equity holders are the owners and decision-makers of the company.  The bond holders have only very specific claims on the company.  In return for no claim on upside potential in the company, the senior debtors generally require first claim earnings for debt service, and assets in the event of liquidation / reorganization.  So that is the deal; bond holders get made whole first for specific claims, equity holders get everything that is left.  Simple really.  Generally true under common law for hundreds of years. 

Explain how the bond-holders "facilitated" the risk-taking of Bear, to such an extent they should share in the losses?  Do the bond-holders share in the profits?  Uh...no.  Do the bond-holders get profit participation / equity kickers?  No.  Do they sit on the Board?  Uh...no.  Do they act as managers?  No...never.  So even though they get absolutely nothing on the upside, have no real say in the direction of the company, they should share the losses with the stockholders?   Such thinking is simply bizarre to me. 

By that logic, depositors of a failed bank facilitated excessive risk taking, and should take a loss.  We should get rid of deposit insurance immediately!  Yes, in theory you can say they are facilitators, but they are not decision-makers or participants in upside success.  So why should they share losses with the equity holders?  Should the landlord also share the losses with the equity holders?  How about payroll, benefits, pension claims?  Maybe all those "facilitators" should also share the losses?  Aside from this being nonsensical, highly illegal, and completely without precedent in the laws of practically any developed country, it makes good sense!  

Also, I would point out that in every bankruptcy (or non-bk) reorg I have ever heard of, the bond holders were made whole before the equity holders.  Period.  And it is no better if the company does not go into bankruptcy, as the bond-holders will force bankruptcy if they are not made whole.  

KB, I wonder if it is you that does not know how to read.  If you did, you could look up the things I have said, and then understand how these things work.  

I am not going to talk to you about this anymore.  It is frankly a bit depressing to me, to deal with such willfully ignorant behavior.