Tuesday morning headlines

Diminished expectations: Goldman Sachs's earnings fell 53 percent and Lehman dropped 57 percent. So naturally, the Dow is up 280 points at last check. Huh? It seems that both reports were better than expected - and in Lehman's case at least good enough to quell rumors about its impending demise. For today. The big news will be coming out of the Federal Reserve in a few hours. The question is not whether we'll see another rate cut, but how much of a cut it will be. Whatever the number will certainly influence trading. (DealBook)

Bear whispers: How could a major investment bank fall apart so quickly? A lot of it involved the rumors and whispers about the solvency of Bear Stearns that began last Wednesday and ended with the bank's announced sale to J.P. Morgan. DealBook's Andrew Ross Sorkin says that the stunning downfall was orchestrated by some of the most powerful people on Wall Street and in Washington.

On Friday morning, when there still seemed to be a glimmer of hope that the stricken Bear might survive, William C. Repko, former chairman of JPMorgan’s restructuring group and now senior managing director at Evercore Partners, was already writing Bear’s obituary. “Bear failed,” Mr. Repko was telling me. “Bear is gone.” He seemed so sure. “This is a run on the bank,” he said. “It’s what happened to Enron.” Bear’s demise, it seemed, was a foregone conclusion. The run on Bear began around midday on Wednesday, when a series of banks and hedge funds started a whisper campaign against the firm. The firm was doomed, they said. It was almost broke. But some of the money managers were clearly talking their book. They were obviously shorting Bear’s stock, betting it would decline. How do I know? Because I was on the receiving end of a handful of phone calls from the Gang of Wall Street Whisperers. All of them offered a variation on the same theme: Bear Stearns is toast; no one is trading with the firm; clients are pulling their money out.

Sticking up for Jim Cramer: His unfortunate comment on March 11 about Bear Stearns being in good shape has been defended in some circles. Writing in Silicon Alley Insider, Henry Blodget pooh-poohs the episode, maintaining that Cramer was talking about money held at Bear Stearns, not about its stock. It's an important distinction (accounts are perfectly fine), but the clip is unclear on what Cramer was referring to. He paraphrases a viewer question by asking if it's wise to get "my money out of there." That could mean a brokerage account or it could mean stock. The main point is that Cramer screamed the all-clear, without making distinctions, and reasonable people might have taken that to include the stock.

Gas prices peaking?: The latest government survey shows that the average gallon of regular in the L.A. area is $3.593, up seven cents from last week. But oil prices have eased off their record highs and some analysts have lowered demand predictions for the year.

Edison CEO cleans up: John E. Bryson will retire this summer with a pension plan and stock options that at the end of 2007 were worth almost $65 million. More than two-thirds of that comes from vested stock options earned by Bryson over his 24-year tenure at Edison (the options' ultimate value depends on when Bryson converts them to stock). From the LAT:

"From the customer's perspective, the customers would have liked to see him bring rates down, not to keep raising them," consumer advocate Mindy Spatt said of Bryson. "If he had done a great job in that regard, we wouldn't begrudge him a nice retirement. But times are hard for the customers of Edison, and Edison has asked for a rate hike." Spatt, spokeswoman for the Utility Reform Network in San Francisco, added that such compensation isn't considered out of line, especially compared with the headline-grabbing $81-million retirement package for Countrywide Financial Corp. Chairman Anthony Mozilo. Even so, she said, "utilities should not be allowed to spend the public's money this way."

Council considers DWP hikes: Lots of bickering on this one. The Department of Water and Power has urged the City Council to boost power rates by 9 percent over three years and the water rate by 6 percent over two years to help cover infrastructure costs. Neighborhood council activists are raising a fuss about the new rates being combined with increases in surcharges for natural gas, renewable energy and imported water. The full council will consider the rates March 25. (Daily News)

Good start in port talks: The two sides laid out the ground rules in the first day, and everybody said the right things. "We're off to a good start and look forward to a successful agreement in the process," said a spokesman for the International Longshore and Warehouse Union. A representative from the Pacific Maritime Association said much the same thing. The contract talks are going on in SF. (Daily Breeze)

Lacter on radio: This morning's biz chat with KPCC's Steve Julian covers the port talks, new flights out of LAX and the death of Roland Arnall. It’s available online or through podcast.