Wednesday, March 26, 2008
Bear Stearns Bailout Illustrates Klein Thesis
In The Shock Doctrine Naomi Klein states (p. 140): "[I]f an economic crisis hits and is severe enough--a currency meltdown, a market crash, a major recession--it blows everything else out of the water, and leaders are liberated to do whatever is necessary (or said to be necessary) in the name of responding to a national emergency. Crises are, in a way, democracy-free zones--gaps in politics as usual when the need for consent and consensus do not seem to apply." In today's New York Times, Andrew R. Sorkin writes (p. C10): " [T]he Fed's fingerprints were all over the new pact [by means of which JPMorgan would acquire Bear Stearns for $10 per share rather than the originally announced price of $2 per share]. In an action almost unprecedented in takeover history, JPMorgan bought 39.5 percent of Bear on the spot to ensure that it would have close to a majority of the [shareholder] votes to approve the deal. That agreement completely disregards New York Stock Exchange rules that prevent anyone from buying more than 20 percent of a company without a shareholder vote. Other parts of the new agreement either stretch the rules or disregard years of precedent in Delaware, where both banks are incorporated. Of course, all this rule-bending was done with the tacit, if not outright, approval of the federal government."