“Developments just prior to and immediately after the bailout illuminate interesting political and potentially ominous market realities. The political reality is that George W. Bush, unlike his father, is most likely a Morgan man. Press reports indicate that W himself was involved in these transactions. Comparing the transactions shows that Morgan received the federal 800-pound gorilla’s unbridled support whereas federal coercion in the Citi-Wachovia transaction was, by comparison, restrained. In “facilitating” the JP Morgan–WaMu deal, the FDIC first wrestled WaMu to ground, executing a midnight foreclosure and repossession of all its assets. The FDIC then sold WaMu’s $302 billion in assets to Morgan for $1.9 billion and wiped out the WaMu equity holders, including a group that had invested $7 billion six months ago. Monday JP Morgan further announced that had no intention of hiring or retaining WaMu management. Wachovia was just the latest bone thrown to JP Morgan. In another federally “facilitated” transaction, on March 17, 2008 JP Morgan acquired global securities giant Bear Stearns for $236 million, or $2 a share. After shareholders complained, JP Morgan increased its “offer” fivefold, to $10 per share. In February of 2008, Bear Stearns stock had a market value $93 per share. Citi, by comparison, has not received the same level of government support. In the Citi-Wachovia transaction, the FDIC did not actually seize Wachovia’s assets. It only threatened to seize Wachovia’s assets, allowed Wachovia to survive as a legal entity and gave Wachovia until December 31 to close the deal with Citi. If W is not a Morgan man, then he is not a good negotiator, because the delay has opened the door for Wachovia to negotiate a better deal…..”

More by Bill Butler at Lew Rockwell.