<p>
[quote]
JP acquired the assets of Bear Stearns for a song and only after the government guaranteed most of the toxic assets. In September the raised $10 billion, most of which was applied against reserves for the Wamu bad assets. Finally, they got another $25 billion last week. JP has become the largest parking garage for toxic bank assets. Their banking business, which is their bread and butter is barely breaking even and their profits have plunged.
JP Morgan posts 84% profit plunge - BloggingStocks
While JP wil most likely make it through, it is only because of huge capital infusions from the Fed. They will probably need another $50 billion or more in 2009 alone as defaults increase in their WaMu portfolio.
[/quote]
</p>
<p>Uh, actually, JPMorgan actually tried to decline the government capital injections. They took it only because the 9 largest banks were all strong-armed by the government to do so, due to the adverse selection problem (if the top banks could choose to take injections or not, then presumably only the weakest ones would, and hence those injections would stigmatize those banks as being weak.)</p>
<p>But more importantly, the Bear Stearns and WaMu acquisitions only prove my point. Yes, the Fed gave help to JPMorgan to acquire those firms. But why did the Fed help JPMorgan acquire those Bear and WaMu, rather than help some other bank from acquiring Bear and WaMu? Heck, why isn't the WaMu acquiring JPMorgan? I think the facts speak quite clearly: JPMorgan is the acquirer because JPMorgan is the strong one. </p>
<p>Nor am I the only one saying so. The markets are saying so also. JPMorgan is clearly outperforming all of the indexes. Not just the banking indexes, but the overall indexes. In other words, the markets seem to believe that JPMorgan is not only healthier than most banks, it is also healthier than most companies in general. Granted, JPMorgan is not doing well, but the other companies are doing far worse. </p>
<p><a href="http://finance.yahoo.com/echarts?s=JPM#chart4:symbol=jpm;range=1y;compare=%5Edji+%5Eixic+%5Egspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined">http://finance.yahoo.com/echarts?s=JPM#chart4:symbol=jpm;range=1y;compare=^dji+^ixic+^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined</a></p>
<p>
[quote]
Losses in the financial sector are already dwarfing the loses from the dot-com bust. The only major corporation that filed for bankruptcy was WorldCom and it was a communications company not a dot-com or IT company. The WorldCom failure was in 2002 in the aftermath of the dot-com bust and more linked to fraud that anything else. Not a single major IT firm went bankrupt. Most of the companies that failed were companies without earnings or assets. Even among the smaller internet companies, it is estimated that over half survived. They were just not very capital intensive.
[/quote]
</p>
<p>Well, I suppose it depends on what you mean by an "IT" firm. But allow me to name just some of the firms that died, off the top of my head:</p>
<p>Global Crossing
Northpoint
Covad
XO Communications
Exodus Communications
Webvan
EToys
Genuity</p>
<p>Now, you might say that some of these firms are not "dotcom" firms. But that's completely missing the point, which is that the tech industry was completely prostrate during the bust. I make no distinction between the laid-off engineers who worked at a dotcom vs. the laid-off engineers who used to work at one of the telcos who died. After all, they all hired IT workers, and a laid-off IT worker is a laid-off IT worker. </p>
<p>
[quote]
You simply can't compare the dot-com bust with the current situation where major institutions have already disappeared including Bear, Merrill Lynch, AIG, Lehman, Wamu, Wachovia with new banks being added every day
[/quote]
</p>
<p>Sure I can. First off, except for Lehman, none of those firms you named actually went bankrupt. They were just acquired. Similarly, I can name plenty of tech firms that didn't actually go bankrupt, but were just acquired. Compaq didn't go bankrupt, it was just 'acquired' by HP (who then proceeded to lay off tens of thousands of people from the combined company). Informix didn't disappear, it was just acquired by IBM, who then proceeded to lay off most of the company. JD Edwards was acquired by Peoplesoft (who was later acquired by Oracle). All of these were major IT firms that are all effectively 'gone'. </p>
<p>
[quote]
In the tech bubble, mostly startup companies were laying off people but you rarely see a CEO from an established company like Lehman Brothers went from a billionaire to a millionaire overnight.
[/quote]
</p>
<p>Actually, I have to disagree. A lot of supposedly rich dotcommers lost plenty of money, at least on paper. </p>
<p>What was worse is that it wasn't just a matter of CEO's losing riches, it was a lot of regular employees who were losing millions (at least on paper). That engendered a lot of anger amongst plenty of regular people who worked at the dotcoms, were 'paid' with stock options, and who thought they were going to be rich and retired once fully vested and then realized that they weren't rich at all. </p>
<p>Just consider some of these sad stories from the dotcom era, not so long ago. Whatever might happen to the bankers, I doubt they'll be going to homeless shelters:</p>
<p>*Mike Schlenz, who recently installed computer networks for a living, had been sleeping in his Honda Civic for three months before he went to a homeless shelter.</p>
<p>John Sacrosante, who earned more than $100,000 a year as a free-lance database engineer, spent his 39th birthday last week with the "brothers" he met at the church shelter where he has been living.</p>
<p>Both are casualties of the dot-com bust in Silicon Valley, where a surprising number of former high-tech workers are rubbing elbows with society's castaways - the mentally ill, drug addicts and other hard-luck cases - in homeless shelters.</p>
<p>"We're all equal here," Sacrosante said. "When you're used to making six figures and working in a dynamic and exciting environment and all of a sudden it goes away, you do have a nice little world of depression going on."</p>
<p>Nearly 30 unemployed tech workers are among the 100 men at the Montgomery Street Inn and other shelters in San Jose run by InnVision, said Robbie Reinhart, director of the non-profit organisation.</p>
<p>"They're not what we used to call hobos on the street. Most have college degrees," she said.</p>
<p>Dot-com failures sent San Francisco's unemployment rate up to 4.2 per cent in May from a rock-bottom 2.6 per cent a year ago - with 18,000 people added, according to a state report.</p>
<p>In Santa Clara County, the heart of Silicon Valley, layoffs in electronic equipment manufacturing and business services rose for the fifth straight month, contributing to a 3.2 per cent unemployment rate in May.</p>
<p>Reinhart said most of the tech workers she sees have had their contracts canceled or been laid off from start-ups and other smaller technology companies. Other shelter residents still have jobs but don't make enough to afford the high price of living alone in the valley, she said.</p>
<p>Top consultants and contractors once named their salaries in the valley. Now, even those who qualify for unemployment benefits soon discover the $40 to $230 weekly check will not cover an apartment here, where rent averages around $1,800 a month.</p>
<p>Suicide and crisis hot line operators in San Francisco and Santa Clara counties report that job-related calls nearly doubled from October to April. Many callers complained of lost jobs or feared they would soon be out of work.</p>
<p>Schlenz, 35, a Bay Area native with a degree in environmental chemistry, made as much as $60,000 a year as a free-lance contractor, installing Unix networks, configuring routers and working in desktop support for small companies. Then his jobs disappeared.</p>
<p>"I'd been to all the job fairs. I'd followed up on all the resumes," he said. "Some of the larger companies approached me several times, but then kept leading me on for months. Departments were downsized and outsourced. Recruiters just stopped returning messages."</p>
<p>Schlenz still has some stock, but the value has dropped. "I cashed in half my stocks to eat. I couldn't even afford gas anymore," he said. He gave up his apartment after running out of cash, and "car-camped" behind a bookstore. He showered at a gym where his membership was good through May.</p>
<p>Someone told him he could get a meal at the Montgomery Street Inn, where he now stays. He volunteers in the shelter's computer lab, teaching residents how to use computers.*</p>
<p>Dotcom</a> bust sends techies to homeless shelters - GupShup Forums</p>