Bear Stearns First To Admit They Are Likely Close To Insolvency By Seeking Liquidity Injections

Chart courtesy of the marvelous Stockcharts.com

One of the main themes since starting this blog is that the banking system in the U.S. is unstable. There will come a time when the banking system has stabilized and the sector will represent a buying opportunity. With rapidly deteriorating credit & economic conditions, I don't believe we are remotely close to that point. Hopefully, no one reading this blog has been lured by the nimrods and dimwits carted onto the comedy channels that have been telling us to buy banking stocks because they represented great value. But, that is each person's own decision. I will say there is a clown born every minute and all of them can't wait to share their act on the big stage. The price of admission to that act is our life savings.

Today Bear Stearns announced they are in serious trouble with injections by the Federal Reserve and JP Morgan. What's new? I mean really. Is this a surprise? I actually commented a few weeks ago on another blog that I expected Bear to go bankrupt. For all I know they are insolvent. They still deny it but last time I checked, one doesn't get capital infusions if life is good. No one knows what is going on because there is little shareholder transparency on Wall Street. You remember shareholders? The ones that own the companies?

Here's something to think about. Isn't it ironic that Wall Street has done everything they could over the past few decades to skirt transparency and oversight and now that very fact will lead to their demise? Isn't it ironic that one of the main reasons international investors were willing to invest in U.S. financial markets was because of the transparency and oversight that highly paid Wall Street lobbyists have worked so diligently against? What's that old saying? Be careful what you wish for.

Mid-day Update: Here's a link to Reuters overview of the Bear Stearns mid-day conference call. Bear CEO says liquidity is strong? Sure it is. That's why your stock has dropped 80+% in the last year. Anything other pronouncements you'd like to make? How about this: You have an immediate external audit done of your financial position. You disclose all of your off balance sheet obligations and exposures to risk for shareholders. Including risk you cannot quantify. Then you share that with shareholders. Transparency is the first step in curing Wall Street's disease.