Tuesday, March 18, 2008

Really Bearish

So I haven't mentioned this before, but I work for a bank.  I'm nothing high-flown, just a spreadsheet monkey with a couple of flat panel displays.  (FOUR OF 'EM!  They give me the worst feeling of dryness in my eyes, so don't be jealous.)  So it's not my brilliance that makes the money, or my bad luck or stupidity that loses it when that happens to be how it goes.

That said, times right now are as dark as anyone with lots of experience seems to be able to recall, and while no one is outside on bread lines or selling apples, it's not as farfetched as you might think, somehow.  Bear Stearns was a veritable 800 pound gorilla in New York (and global) finance, and the sudden collapse is pretty much unprecedented.

The fact is that while we look at this as the comeuppance of greedy and wealthy people, there is something that has been mentioned but bears reiterating: one third of the company was owned by the employees.  The $240 million dollar purchase price for JP Morgan was one tenth of the value that was in the marketplace on Friday ($2/share, down from $30/share) and just over an eightieth of the prices that were prevalent a number of months ago.


Let's do the math:

Roughly 14,000 employees held a third of the company, 120 million shares.  That, at the 52 week high of $159 per share comes to just over $19,000,000,000.00

That is a value in employee hands of over $6,000,000,000.00, which has turned into an $80 million value in a matter of two days.

That's an average of almost half a million dollars in savings lost per employee.

Oh yeah, and half the staff is going to get fired.

I've talked to colleagues who have friends who've lost pretty much everything overnight, and are now unsure of how to pay for their mortgages, which is (to say the least) a touch more ironic than I even need to comment on... the unaffordable mortgage, the teaser rate, and the overengineered nature of the Mortgage Backed Securities marketplace are the source of the pain, and to see perfectly honest and hardworking people lose a lifetime of work is pretty grim.

Even if they were among the highest paid Americans, it is still hard to imagine going through three days with that much of a drawn out punch in the stomach.

People are quick to judge the industry, quick to lay blame for the structuring of transactions that allowed ratings to be synthetically created (legitimately, especially given that the ratings agencies played along...)

The fact is that we don't want to spread the blame evenly, and justly:

-People wanted houses that were more expensive than they could afford.  

-Realtors wanted the biggest commissions they could get, no matter what the cost.  

-Local mortgage issuers wanted to get people the biggest loan they could sell to a lender. 

-Issuers wanted to sell highly rated securities built on mortgages paid by people with lousy credit.  


Blame everyone you feel you need to, but don't forget where that chain started.

Tigger and I looked at buying, looked at vacation houses, and didn't go ahead with the plan, because prices were inflated, the market was overheated, we would have gotten a fishy tweaked out adjustable rate, and...


Read that five times, slowly.  If you can't pay your bills, it's your damn fault too.

And now?  Now we all pay for your stupid house as taxpayers.

Your goddamn welcome.

I'd just like to keep my job, okay?

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