Bear Stearns said Friday its liquidity position has significantly deteriorated and it is now getting help from JP Morgan Chase and the Federal Reserve Bank of New York.
CNBC asked the experts what they thought of this Bear Stearns bailout.
John Kilduff: This Is a "Confidence Story"
“We’ve been saying in my shop you really don’t want to own anything with a ticker symbol these days. Now this confidence story I think is going to go on. This is not going to be the last body blow to the market, I don’t believe. There are other significant shoes that are in the process of dropping on us, and that’s why I think you’re going to see further increases in the commodities across the board, because it’s the safe haven, it’s the inflation haven, the safe haven, the hard asset haven that investors are just running to right now just because they’re scared.”
John Kilduff, MF Global Energy Analyst
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David Kotok: “This Is About the System”
“This is not about the stock price of Bear Stearns. This is about the system. It is about the ...frozen mortgage-backed constructed paper and how you thaw it out and get a liquid market and get it to trade, and the mechanism now with the changes in the Fed, is the Fed will take some of the collateral, they will accept it as collateral, then they will loan to the banks to get banks into the brokerage community where the freezing is taking place. This is about getting liquidity to markets which are dysfunctional and seized up.”
David Kotok, Cumberland Advisors Chief Investment Officer
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Art Nunes on Bear's Future
“It seems like the major banks and brokerage firms every five to seven years create a mess for themselves, and this is one of the biggest ones they’ve ever gotten themselves involved with. There’s a tremendous amount of leverage here. Bear Stearns was one of the leading traffickers in these mortgage-backed securities, using a lot of leverage. It’s based on history that when we bottom out from this crisis and recover, it’s pretty typical to have one or two household-type names go bankrupt and reorganize, and I don’t know if it’s going to be Bear Stearns or not but it may very well be.”
Art Nunes, IMS Capital Management
(Contd.)
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Art Cashin: “This Isn’t Over Yet”
“What I think you’re seeing here is a real rare exception…What they’re doing here is coming in with an emergency loan, in fact that was part of what helped the selloff this morning. It wasn’t ‘They got money we should be relieved.’ Where did they get it? The Federal Reserve, the lender of last resort, and that I think prompted some of the sellers to say ‘Wait a minute, this isn’t over yet.’”
Art Cashin, UBS Financial Services Director of Floor Operations