Word: beare
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...Kuttner may be right about the conflicts, but it's awfully hard to see how they brought on the current mess. In fact, Bank of America's takeover of Merrill Lynch and JP Morgan Chase's of Bear Stearns underscored a truth that was already becoming apparent on Wall Street - super-banks (more commonly known as universal banks) are, for all their flaws, a lot more stable and secure than un-super investment banks...
...Maybe the CFTC, a strange little agency overseen by the Congressional agricultural committees, had no business regulating OTC derivatives. But the fact that nobody regulated them, even as the business grew and migrated from banks to firms like Bear Stearns and AIG, is a big reason why the world's financial markets are in such crisis this week. Bear and AIG were bailed out in part because they were big players in the market for credit default swaps, derivatives that are meant to insure against loans gone bad. Regulators have such an unclear picture of who's on the hook...
...line from by the Treasury Department that bailing out Fannie Mae and Freddie Mac was not a precedent, and that the Federal Government would not be lender of last resort to Wall Street? The public did, but Wall Street didn't. If the bank was open for Bear and Freddie and Fannie, why not Lehman and AIG? It took a high noon showdown over the weekend for Treasury Secretary Hank Paulson - one of Wall Street's own - to convince the Street's gunslingers that he wasn't kidding about the moral hazard issue...
...loan industry. Plus, it was awfully hard for outsiders - and even insiders - to understand the gravity of the company's problems. "You can read through every financial statement in the world and have absolutely no clue as to the risks they are taking," says Leo Tilman, a former Bear Stearns strategist who now runs the advisory firm L.M. Tilman...
...clearly, the financial sector in the U.S. is facing a huge crisis. When you have two big companies like Bear Stearns and Lehman vanish, and Merrill Lynch being absorbed, that tells you a lot about the difficulties being faced by the financial sector...