Guest Post: What Really Happened To Bear Stearns, by Ted Butler

Mon, Feb 17, 2014 - 5:25pm

Uncle Ted may be onto something. By connecting the dots of the available data from March of 2008, Ted concludes that it wasn't Credit Default Swaps that led to the demise of Bear Stearns. It was, instead, a completely different set of derivatives that, heretofore, no one has even considered.

What Really Happened To Bear Stearns

by Ted Butler

Six years ago the well-known investment bank Bear Stearns imploded. In February 2008, Bear Stearns stock traded as high as $93; by mid-March the insolvent company agreed to be taken over by JPMorgan for $2 a share (later raised to $10 after class-action lawsuits). In the annals of Wall Street, there was hardly a more sudden demise than the fall of Bear Stearns. The cause was said to be a run on the bank as nervous investors pulled assets from the firm. Bear Stearns was said to be levered by 35 times, meaning it had equity of $11 billion and total assets of $395 billion. This is a very small cushion if something negative suddenly appears.

Something negative did hit Bear Stearns in the first quarter of 2008; although there are remarkably few details of what went wrong. Since Bear had a significant presence in sub-prime mortgages and that market was in distress, it is assumed the fall of the firm was mortgage related. That may be true, but there was no general stress in the stock market through mid-March 2008 reflecting a credit crisis. Was there instead some specific trigger behind the company’s sudden collapse?

I believe that sudden and massive losses and margin calls of more than $2.5 billion on tens of thousands of short COMEX gold and silver contracts were the specific triggers that killed Bear Stearns. Let’s face it – Bear was so leveraged that a sudden demand of more than $2.5 billion in immediate payment for any reason could have put them under. Bear Stearns’ excessive gold and silver shorts on the COMEX are the most plausible reason for the sudden demise. Bear Stearns did fail and due to a sudden cash crunch was acquired by JPMorgan for a fraction of what it was worth two months earlier. Bear Stearns was the largest short in COMEX gold and silver at the time. The day of Bear Stearns’ demise coincides precisely with the day of the historic high price points in gold and silver. That is also the same day the biggest COMEX gold and silver short would experience maximum loss and a cumulative demand for upwards of $2.5 billion in cash deposits for margin. It was no coincidence the music stopped for Bear Stearns that same day.

Gold prices rose from under $800 in mid-December 2007 to $1,000 in mid-March 2008, a gain of more than $200. Silver prices rose from under $14 in mid-December to $21 when Bear Stearns failed on March 17, 2008. That was a gain of $7. This was the highest price for silver and close to the highest price of gold since 1980. Obviously, a $200 rise in the price of gold and a $7 rise in the price of silver is not good if you are the biggest gold and silver short.

The concentrated short position of the 4 largest short traders in silver was at an extreme level of more than 300 million ounces. In contrast, the concentrated long position of the 4 largest long silver traders was a bit above 100 million ounces. In COMEX gold, the big shorts held two and half times what the biggest longs held. Since we know that Bear Stearns was the largest short in COMEX silver and we also know how much gold and silver prices rose in that time period, all that has to be established is how many short contracts Bear Stearns held. That would tell us how much money they had to come up with in margin money. All market participants on the COMEX, including the leading clearing member (which Bear Stearns was), must deposit additional funds daily to cover adverse price movements.

Thanks to historical Commitments of Traders report (COT) data from the CFTC, in the relevant time period (December 31, 2007 to March 17, 2008) the net short position of the 4 largest gold and silver shorts on the COMEX averaged 165,000 contracts and 60,000 contracts respectively. My analysis indicates Bear held 75,000 net gold contracts short and 35,000 net silver contracts short. Those are minimum numbers, as I think Bear’s position could have been higher.

A $200 adverse price move on 75,000 COMEX gold contracts would result in a mark to market loss and margin call of $1.5 billion. A $7 adverse price move on 35,000 COMEX silver contracts would result in a mark to market loss and margin call of $1.2 billion. Bear Stearns had to come up with $2.7 billion because gold and silver prices rose sharply in the first quarter of 2008 and the company bet the wrong way. That it couldn’t come up with all the margin money for the losses in gold and silver, is the most visible reason it went under.

What happened to Bear Stearns was exactly what I had warned the Commodity Futures Trading Commission (CFTC) about continuously for the twenty years before the event. Aside from the manipulative impact that a concentrated market corner would have on price, the biggest risk was what would happen if the largest short ran into trouble. The facts in the case of Bear Stearns indicate that the worst did occur. The biggest short did go under. During the relevant time period, I was in private email contact with CFTC Commissioner Bart Chilton who indicated that the Commission was considering silver matters closely and that there would be a finding published soon. The subsequent CFTC finding was released on May 13, 2008 and completely denied anything was wrong on the short side in COMEX silver due to large traders.

Here’s the problem – the report lied. It conveniently ignored the failure of the largest COMEX gold and silver short seller, by only considering events through Dec 31, 2007 and not through the March 17, 2008 date of Bear Stearns’ failure, a clear lie of omission. How could the CFTC issue a report on large traders on the short side of silver and overlook that the largest short trader of all went under because of that short position? It has taken me some time to see all this in the proper perspective. What I now see is deeply disturbing, but it answers many questions. Even though I petitioned the CFTC about the illegality of the concentrated short position in COMEX silver for decades, they disregarded those warnings. Then Bear Stearns went under for precisely the reasons I warned about. Subsequently, the CFTC kept it quiet and denied all allegations.

Any regulator worthy of the name should have known that a lopsided, large trader mismatch was dangerous on the short side. Having misjudged just how dangerous the situation was, the CFTC and the CME Group put in motion a scheme to save the shorts and punish gold and silver investors. By arranging, with the Federal Reserve Chairman and Treasury Secretary, to have JPMorgan take over Bear Stearns’ silver and gold short positions, the US Government embarked (or continued) on a journey of allowing price manipulation, in stark violation of commodity law.

Since Bear Stearns was a failure that threatened the financial system, it necessarily invited the involvement of the nation’s highest regulators, the Treasury Secretary and the chairman of the Federal Reserve, as the historical record indicates. Both had to be aware of the gold and silver margin problem at Bear Stearns. Additionally, since Bear Stearns was the leading clearing member of the exchange, you can be certain that the CME Group was more than aware. The CME was the one issuing the margin calls to Bear. Also, there is no way that JPMorgan wasn’t aware of Bear Stearns’ gold and silver predicament. Yet none of this was made public.

These facts indicate that everyone at the top had to be aware that excessive gold and silver shorting was at the center of the Bear Stearns fiasco. Since the Feds requested JPMorgan’s assistance, there can be no question that JPMorgan demanded (and received) permanent immunity from future gold and silver allegations. This explains how they have been able to establish market corners in gold and silver today that commodity law prohibits. Had not the U.S. Treasury Secretary, the Fed chairman, the CFTC, and the CME agreed to JPMorgan’s takeover of Bear Stearns’ gold and silver positions, the excessive market concentration and manipulation in these markets could not have continued.

The interference of the U.S. Government in the Bear Stearns affair explains what was previously inexplicable: why the CFTC couldn’t find anything after investigating a silver manipulation for five years, and why the CFTC and CME were deathly quiet in reaction to the giant price smashes in gold and silver, particularly the two 30% price smashes within days in silver in May and September of 2011.

What baffles me today is that no well-known journalist from outside the gold and silver world has yet picked up on what is an easy-to-document story of epic historical proportions. It’s the story of why Bear Stearns went under, and how the gold and silver price manipulation continued since the day JPMorgan took over Bear. I think the story has Pulitzer Prize written all over it.

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About the Author

turd [at] tfmetalsreport [dot] com ()


Feb 17, 2014 - 5:29pm

Not meant to pile on

I only post this to serve as a reminder of how quickly Bear died and how it caught nearly everyone off guard. This clip is from March 11, 2008...just one week before the demise.

Feb 17, 2014 - 5:37pm


gold from sochi,

Feb 17, 2014 - 5:38pm

I cant believe it!

Two Firsts in 1 day for a newbie.

Edit- SECOND missed it by that much chief

Feb 17, 2014 - 5:39pm


My lucky day, I think I will celebrate by going to the LCS tomorrow


Edit: aarrgghh foiled by a newbie who has learned how to claim top spot.

I guess I am thurd

Feb 17, 2014 - 5:42pm


and a thurd.

nope, a furth(geson)

metalsbyamile silver66
Feb 17, 2014 - 5:43pm

Learned from the best

Learned from the best silver66 wink

Still go to the LCS , teaching is exhausting and has its rewards.

Feb 17, 2014 - 5:48pm

No one Wants First?

Edit: oops, too late. Damn, had to read the article, didn't I . . .

Anyhow, fine article, Mr. TF.

I hate to throw water on the party, but this explanation, that Bear was massively short the Comex, suffered a massive margin call, could not come up with funds, which lead to US Govt and Fed and JPM and CFTC involvement, is great, but correlation is not causation.

I need facts and proof, not just someone pointing at the topping of the spot price at the same time of the Bear failure. Even if the someone is Butler, who has been on his game for decades, I still just loathe the simplistic reasoning of coincidental timing as being causation all of itself.

Can anyone provide some written proof that CME issued a margin call to Bear for the $2 Billion plus?

If not, then let us not just conclude things.

Although, as a counter thought, it WOULD explain why Hollywood suddenly made a film, blaming the blow up on subprime, hmmm . . .?

This is a GREAT post, and one to vet, thoroughly, so we can at least intellectually analyze this for further study. All viewpoints are welcomed. Please, no flaming. Let's dig in!

Hellfish California Lawyer
Feb 17, 2014 - 5:49pm

Great Content

We're really getting our $9 worth with posts like those above.

Feb 17, 2014 - 6:07pm

Weird NetDania Open (Again)

One full minute of gold trade before anything showed on the silver chart. Then the maximum allowed 1% pop in price. Not sure what volume crossed the tape before the curtain came up but bet it was a lot.

Now to read Uncle Ted's latest contribution.


California Lawyer
Feb 17, 2014 - 6:10pm

At nearly 6 years, "proof" is hard to come by

But the reason nearly everyone began, in 2009, to recognize JPM as The Big Short was Uncle Ted's research of the CoT and BPRs. Uncle Ted was first. He alone saw the huge transference of the massive silver short position from Bear and recognized that it went to JPM on the buyout.

So, now, here's Ted connecting some dots. Of course it's all speculation. Speculation is all we have. But, if this is correct, it certainly helps to explain some things...such as:

  • Why CFTC silver investigations never were allowed to go anywhere
  • Why the CFTC ignores JPM's market corners
  • Why CME ignores JPM's blatant disregard for spot-month position limits

I could go on and on. Maybe Uncle Ted's all wet? Who knows?? It is a very interesting theory, however.

Feb 17, 2014 - 6:24pm

Re Pulitzer Prize

This has got Matt Taibbi's name written all over it. Except maybe he values his life more than the prize.

@Silver66- The kid's got potential.

@metalsvia1mile- Don't be miss lead by the Ferd fellow. Who you gonna believe a hard working border collie or a corrupt insurance agent. Thanks again for Pining doing the hard investigative journalism as well as the photo shopping.

Actually I'm just kidding. Ferds my brother in law and he taught me everything I know.

You are the best, Ferd.

@ Metalsbyamile by Ferd Torgerson

1 day 3 hours ago

Welcome, glad you have joined.

You'll like being a part of this community.

I can't really offer much advice on the credit card other than to avoid MurphyPal.

Of course, if your limit is $10k, you have nothing to worry about.

Murphy doesn't deal in or steal amounts of less than $50k.

Interesting chart

24 Hour Gold

[Most Recent Gold Prices]
Feb 17, 2014 - 6:32pm

here you go


Feb 17, 2014 - 6:36pm


Jesuit planned manipulation

Feb 17, 2014 - 6:59pm


Great stuff. I think I can answer one question though. 

"What baffles me today is that no well-known journalist from outside the gold and silver world has yet picked up on what is an easy-to-document story of epic historical proportions."

Because the entire fiat banking system would fail if this was exposed. And those exposing it in MSM would be suicided, post hast. 

Feb 17, 2014 - 7:40pm

I think Butler is right on!

I'm a simple man, unlike CalLawyer who thinks and writes well, and whom I respect. Nevertheless, Ted's article appeals to my sense of simplicity and common sense.

It's always been about the "money." Even though the masses have been hoodwinked into accepting unbacked currency (after all, how could it exist without belief and cooperation?) and railroaded the rest of us, who believe in sound money, into the system, the real issue is always the money -- and the following thereof.

So, to borrow flyinkel's last line from his post above;

"The real fight is central banker surveillance and CONTROL vs. world population."

Feb 17, 2014 - 7:41pm

CAL Lawyer response

Dear Turd please fix the IE11 problem now. My comments magically deleted twice. Many folks are having the same problems and it affects their ability to post. 

Firefox has problems too and seems much slower to upload and travel from page to page, painfully slow actually. Chrome requires a log on I don't currently have and don't want.

Game over for now. Out

cliff 567
Feb 17, 2014 - 7:48pm

5 freebies in a row thanks Turd

5 freebies in a row thanks Turd

cliff 567
Feb 17, 2014 - 7:51pm



Feb 17, 2014 - 7:53pm

Insightful article!!

Very well done. Here's another "official story" I just can't buy, no matter how hard I try.

Thoughts on Germany: Media sell is they didn't get their gold back, they are being spied on by those brutes the US. That is the media position but why? Do you trust the media?

Why is Germany being highlighted for the spying when, in fact, virtually every leader of power was having the same thing done to them by the US? Why is Germany so unique? It isn't.

What do we know about Germany? That the US has been tied at the hip to Germany since WWII, just look at the US military and agency presence over there. That we imported the Stasi from them after WWII? That Germany is the home of Fascism? That the easiest way to spend boatloads of money on your very own "big brother surveillance state" is to have the people clamour for their very "own" internet devoid of US "thumbprint". So far the "sell" is working beautifully and is a MEANS to an END.

We need to wake up. US vs Germany is manipulated perception ONLY. The real fight is central banker surveillance and CONTROL vs world population.

Feb 17, 2014 - 7:55pm


A way to painful re-minder, but that is when i woke up when they took have o f my money.

Feb 17, 2014 - 7:56pm

Not to stir a hornets nest

But I heard the exact same story about the LTCM bankruptcy/ bailout. Except in that one, there was a mysterious 400 million dollar discrepancy between the audited value and the publicly disclosed settlement- and traders were quoted as saying that the LTCM short was estimated at this same figure. The implication was that US gov covered the shorts to other BB's with treasury gold, with the promise that they would continue to suppress price. Seems plausible, but no proof (sorry Cal!)

On my phone so can't give links but a search might find this story. If true, none of the principles would ever talk about it, which seems par for the course.

Feb 17, 2014 - 7:56pm

Really Good Quote

"So these anti-gold idiots are just that, idiots, or else they have the memory of a goldfish, because currencies come and currencies go, as sure as night follows day. It is the natural order of things. And as you can see, it's not about trading gold to get rich or getting long gold or buying one by two call spreads or getting fancy, it literally is about protecting yourself in the end. It's not like Williams got rich. He just stayed rich. Everyone else got poor."

It's not like Williams got rich. He just stayed rich. Everyone else got poor.

Feb 17, 2014 - 8:02pm

more Grant

"Nobody really understands gold prices, and I don't pretend to understand them either."

– Ben Bernanke

mon·ey (mŭn′ē)

1. A medium that can be exchanged for goods and services and is used as a measure of their values on the market, including a commodity such as gold, an officially issued coin or note, or a deposit in a checking account or other readily liquefiable account.

2. The official currency, coins, and negotiable paper notes issued by a government.

3. Assets and property considered in terms of monetary value; wealth.

"There's fool's gold — pyrite — and then there's fool's gold — gold owned by idiots willing to trade it for worthless dollars."

– Jarod Kintz, This Book Has No Title

"The desire of gold is not for gold. It is for the means of freedom and benefit."

– Ralph Waldo Emerson

Edit- I see Ty beat me to it.

Feb 17, 2014 - 8:04pm


Didn't they get a Nobel prize for economics?

Like Obama got one for peace?

Damn, those question marks are annoying.

Feb 17, 2014 - 8:11pm

Let's Explore This

You know us lawyers, always wanting proof and stuff . . .

I am damn glad Ted figured all this out. You, too. I still struggle with numbers, data, and the analysis thereof. But, I do appreciate the concepts. Bear had a huge short position, in silver, that much is beyond dispute, and JPM inherited it. From those two facts alone, many, many inferences can be drawn, and not a single one is definitive.

Here is an example:

AIG failed, right about the same time as the spot prices of gold/silver peaked; therefore, AIG failed because of its link from derivatives based on spot silver/gold.

See? It sounds good, it may be true, but all I did was draw an inference from two different facts. This is also known as jumping to conclusions. The inference does NOT necessarily follow strictly from the two other facts. Instead, there are competing inferences which can be drawn. For example, the failure of AIG at or about the time of the peak in gold/silver could be a pure coincidence, unrelated to the price of metal. Indeed, AIG was reputed to have been the counter party on credit default swaps, and when some derivatives failed, oops, AIG had to pay off, but could not, thus allowing the vampire squid to swoop in and take the good stuff, leaving the bad stuff to others. Why is that not also the case with Bear? Who knows.

I would LOVE to believe the Ted Butler story, all of it, down to the corrupt govt officials and CFTC in on the plot. It makes total sense to my conspiracy-minded sensibilities, and I have an instinctual, visceral reaction that what Ted is saying is absolutely true.

But, like Alonzo said, "it's not what you know, it's what you can prove."

 So, until there is some written proof, or testimony under oath, we have smoke and mirrors and a great theory. Let's see what we can prove.

Feb 17, 2014 - 8:43pm


If my middle age memory serves me correctly...AIG and Lehman failed six months later, in the fall of 2008.

Bear was a standalone event in March of that year.

Feb 17, 2014 - 9:10pm

Simply amazing!

Turd Thanks for getting uncle Ted to allow turd nation to view this. Priceless. Connects many dots that's for sure 

Feb 17, 2014 - 9:23pm
Gold Dog
Feb 17, 2014 - 9:30pm

You can't spell

BS without Bear Stearns.

Being as leveraged as they were it could have been any number of factors or a combination of several.

This thesis sure answers a lot of questions if it trues up.

It couldn't have happened to a more deserving group!

Your friend,


Feb 17, 2014 - 9:43pm

Let's Explore This

"Bear had a huge short position, in silver, that much is beyond dispute, and JPM inherited it."

1. OK, I'm prepared to accept that as a statement of fact.

2. Silver advanced from $15 in January 2008 to $21 in March 2008, a fact beyond dispute.

So as a consequence of (1) and (2) anyone with a short position of some historical origin (prior to January 2008) would face increasing and overwhelming margin calls as silver advanced 40%. Sounds like a MOASS to me.

QED: The straw that broke the camel's back.

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