Now it is being reported by John Olagues at OptionsForEmployees.com that the entire buyout was fraudulent from top to bottom and an exercise in enriching insider traders betting on the collapse of the company. The entire article makes for very interesting reading as a case study of how investors are able to manipulate markets and use even larger financial institutions to arrange fire-sale buyouts and leave the losses at the feet of taxpayers.
These inside traders were even able to keep up the propaganda war in the days before the surprise collapse and merger, with the media and investment advisers in print and on television denying any problems with Bear Stearn's liquidity and recommending investors hold onto the stock. The rumors of a liquidity crisis seem to have been used as justification for the bank's collapse, while the recommendations to keep money in the firm allowed inside traders to profit from the stock price's collapse.
Of course, without the Federal Reserve, none of this would have been nearly as easy. JPMorgan was allowed to finance its purchase of Bear Stearns with capital from $55 billion in loans guaranteed by the Fed. Collapse the company, let the inside traders take enormous profits, then let the American people pay for the rescue of the company; that seems to have been the plan from the beginning.
"The bail-out is a great deal for J.P. Morgan, the illegal insider short sellers got a great deal. Bear Stearns stock holders and employees got a very bad deal and the sellers of puts sustained large losses."
The benefits to JPMorgan Chase are especially noteworthy, as it is one of the corporations with the largest exposure to the derivatives market, as well, which has been inflated to nearly $700 trillion. With the credit crisis and subprime meltdown contributing to capital markets at risk of systemic collapse, $55 billion stolen from the people would be a welcome gift to any bank.
So, Bear Stearns will become a part of JPMorgan Chase and be allowed to continue their fleecing of American homeowners through mortgage servicing fraud, hedge fund manipulations, and moral hazards rewarded with free money. This widespread fraud, though, is only a natural outgrowth of the complete control of the money supply by private banks and the creation of money through debt loaned to the people and paid back to the banks.
More and more people are calling for an end to this system of deception and theft by proposing the Federal Reserve be shut down. If this were to be done and the control of money given back to the people in forms of local currencies or contracts denominated by gold or silver, a better monetary system may develop, in time.
Unfortunately, though, shutting down the Fed and keeping all of the power centralized will only result in a shuffling of papers and a name change; a new department controlled by the banks will be established and the current system of money creation and inflation will continue. The Bear Stearns deal, along with similar insider trading schemes used to collapse currencies, countries, and companies over the decades of the Fed's existence, is only one more sign of far too much power in the hands of central government.