The eye of the storm was missing from the Senate Banking Committee hearing yesterday, but his presence was strongly felt. People who know him refer to him as “Hurricane Hank” – an apt name for the man who told Bear Stearns they had 48 hours to be acquired before Asian markets opened on March 17. CEO Alan Schwartz testified another buyer besides JPMorgan was interested in buying Bear, but was unable to perform due diligence in such a short amount of time.
In the drama of Bear Stearns, it is the fire triplicity that commands center stage in the form of Treasury Secretary Hank Paulson (Aries), New York Federal Reserve Bank President Timothy Geithner (Leo), and Federal Reserve Chairman Ben Bernanke (Sagittarius). Fire energy is enthusiastic and always ready to spring into action. However, each of the fire signs express their energy in slightly different ways.
As the first sign of the zodiac, Aries energy needs to accomplish things quickly and aggressively, before moving on to something else. When Bear Stearns (BSC) liquidity dropped $10 billion in 24 hours due to a “run” on the investment bank, the government quickly got involved. Undersecretary of the Treasury Robert Steel testified yesterday that Paulson “was in constant communication in trying to be helpful to Bernanke and Geithner.” Steel said it was Paulson who told CEO Jamie Dimon his view that JPMorgan should offer a low price for Bear, as he “wanted moral hazard to be protected as much as possible when federal money is involved.” In the White House morality play, the sacrifice of Bear Stearns was a symbolic gesture to show America that the Administration only favors corporate interests 99.9% of the time. As the former head of Goldman Sachs, Paulson has proposed a “Blueprint” for regulatory reform where the Fed allows investment banks to bring their collateral to the discount window in times of trouble, but cannot regulate them during the good times. American taxpayers may end up footing the bill on Bear and possibly other financials, yet the Administration is against Congressman Barney Frank’s plan to trade real mortgage writedowns by lenders for government guarantees.
Bernanke, Geithner, and Steel (Paulson had went to China) kept making their sales pitch to Committee members that making a $25 billion loan to Bear as well as taking on $29 billion of its collateral after JPMorgan acquires it, was necessary to prevent a broad-based financial collapse that would have spread from Wall St. to Main St.
With the Sun, Mercury, and Uranus lined up in Leo, Geithner expressed his points forcefully and mostly in numeric fashion. A bit arrogant at times yesterday, it was clear that he was the real leader of the Fed in this deal. (Several times during Wednesday’s Joint Economic Committee hearing when asked questions about the Bear deal, Bernanke replied “ask Geithner”.) It was Geithner who hired investment advisory firm BlackRock (BLK) to help the Fed review Bear’s assets. BlackRock will manage Bear’s collateral at the Fed for a sum “to be worked out later”, according to Geithner.
Leo rules the stock market as it relates to all forms of speculation. Geithner said it was his personal view that Bear was “not a sound institution” to go directly to the discount window that the Fed opened to investment banks after Bear collapsed. But optimistic Bernanke kept emphasizing that “a god bit” of Bear’s collateral at the Fed is “very highly rated” and the “risk is not remotely close to $30 billion. “BlackRock gives us reasonable comfort that we will recover principal and interest. We have the luxury of up to 10 years to sell. If we’re fortunate, we’ll turn a profit.”
Being ruled Jupiter, the planet of growth and expansion, when Bernanke panics, he floods the market with massive amounts of liquidity. He projects a rosier forecast for the second half of 2008 (when Pluto will retrograde back into Sagittarius). When asked yesterday if he was concerned about inflation, Bernanke replied: “Inflation has been too high – 3.5% instead of 2%. The primary reason is prices of globally traded commodities.”
What the Chairman won’t admit to is that his drastic lowering of interest rates are a contributing factor in causing the commodity bubble. Bernanke fails to do the math that lower interest rates = higher food and energy costs. Lower rates don’t result in easier to obtain consumer loans as lenders have tightened their rules. Lower rates discourage saving and encourage financial alchemy. Financial companies are trying to clean up their balance sheets, but Bernanke and Paulson are pushing them to raise more capital for expansion.
The Bear Stearns saga began for Jamie Dimon while he was celebrating his birthday. With his Mercury in Pisces challenging Saturn in Sagittarius, Dimon is respected on Wall St. for making smart acquisitions at advantageous prices. He told the Committee that he wasn’t willing to assume the full risk for Bear without the Fed taking on most of it, and that the price he was willing to pay for Bear was “not based on the value of the company, but protecting the value of JPMorgan.” Transiting Saturn is challenging Dimon’s Mercury/Saturn showing the government pressure to do buy Bear, and Dimon revising the deal one week later.
Dimon told CNBC after the hearing that “I never forecast the future because no one really knows”, but Bear shareholders approving the deal is a “foregone conclusion.” I guess so when it was revealed last night that JPM bought 11.5 million BSC shares on the open market and expects to buy more until it owns as much as 49.5% of Bear Stearns.
Like Northern Rock in the UK, the early transit of Pluto in Capricorn is manifesting as the government exerting its power over private enterprises in trouble, yet refusing to reform the issues that brought us to financial crisis in the first place.
Related Posts: “Bear Stearns’ Easter Basket” and “The Fed Under Fire”
Hank Paulson: March 28, 1946 time unknown Palm Beach, Florida
Timothy Geithner: August 18, 1961 time unknown New York City
Ben Bernanke: December 13, 1953 time unknown Augusta, Georgia
Jamie Dimon: March 13, 1956 time unknown New York City