Oh yes, I watched way too much television as a child. And one fond memory is Detective Columbo conducting his interview: he would ask a series of obvious, softball questions and come off as slightly bumbling; he would thank the person and turn to go; then almost without fail he would turn back and say “Oh! And one more thing!”. Then he would ask the one important question that would unravel the case.
And that brings us to Bear Stearns. It was 9 months ago that they were forced to shut down a couple of divisions that were in over their heads on sub-prime mortgage backed securities. Merrill Lynch had to bail them out of that, and sell the assets for whatever they could get. Everyone heaved a sigh of relief, thinking problem solved, disaster averted, now everything can get back to normal.
By the beginning of August, Citibank admitted that they, too, had problems. But — CEO Charles Prince swore to investor Prince Alwaleed bin Talal — this is it and there will be no surprises. By November he had to confess this was not true. His resignation was demanded and received.
Sandwiched in this mess, we have Countrywide, who declared their “first loss in 25 years” but swore that they would be profitable the next quarter. They weren’t. By that time they were in the process of being bailed out bought by Bank of America.
And here we are, another shoe drops, another “one more thing”, Bear Stearns is actually so bad off they might be forced out of business. JP Morgan Chase and the Federal Reserve are having to prevent total collapse after what is described as significant deterioration of liquidity in the past 24 hours. I am having a tough time imagining what could go so horribly wrong in a day: were they short gold? Somebody knew there was trouble afoot, and that somebody sold a whole lot of options yesterday.
Despite the President’s tough talk at the Economic Club of New York — he has just finished speaking as I write — there will be no stability for our economy as long as we are in Columbo Economy mode, waiting for more centipede shoes to fall from our financial institutions. Bad enough we have stagnant wages, hints of stagflation, a sinking dollar with no sign of imminent stabilization, financial websites telling us about investing strategies for a recession, oil prices that have hit $110 a barrel (oh the nostalgia for mere $60 per barrel a mere year ago!) propelled on world demand and a weak dollar, gold prices over $1000 per ounce, and that same weak dollar causing a rise in prices of food commodities like wheat and corn and soy; there’s quite enough going wrong without help from Wall Street.
Cross-posted at The Moderate Voice.
In closing: Got Chemicals?; How and why the Feds might be monitoring your bank account; and a summary of Bush Administration Horrors.