Posted on 03/16/2008 3:37:09 PM PDT by Ernest_at_the_Beach
Bear Stearns was racing Sunday afternoon to sell itself to JPMorgan Chase for more than $2 billion, according to people involved in the talks. Meanwhile, Bear Stearns, whose solvency is in question, was also making preparations to file for bankruptcy protection as a backup plan should a deal not be reached, these people said.
A deal for Bear Stearns would end the independence of one of Wall Street’s most storied firms and help halt a sweeping panic that set in at the end of last week, causing Bear Stearns’s stock to swoon 47 percent on Friday. If an agreement is not reached and Bear Stearns files for bankruptcy, it could cause an even deeper global scare over the fate of the financial system.
The talks, which are being overseen by the Federal Reserve and the Treasury Department because of their potential effect on financial markets, are being rushed in the hopes of reaching a deal before stock markets open in Asia at 8 p.m. Eastern time.
(Excerpt) Read more at nytimes.com ...
Next time people complain about handouts, don’t forget this one.
Well good luck...they have an hour and 14 mins.
This can’t end well. I really do not want the Federal Reserve brokering buyouts of private sector companies.
JPMC is one of the few financial institutions fairly unscathed by the subprime mess. The question I ask is will they turn Bear Stearns around, or will Bear Stearns drag down Morgan too?
LOL - and gold is already up.
I guess on a lazy Sunday afternoon with nothin to do, you just get togehter with your buds at work, the mucky-mucks from a multi-billion dollar failing company, and some reps from the Fed gubmint with very deep pockets, and you buy out this injured gorilla with guarantees from da taxpayers, all in time for a late supper.
This blows my mind — I’ve never seen anything like it. These thinkgs usually take months.
Is this a good move for Morgan? Would they have bought Bear Stearns without prodding by the Fed?
that’s a good question. One thing for certain, there’s no way for them to do all the due diligence that would ordinarily be part of a deal like this. Unless the government immunizes them somehow, I don’t see how this doesn’t end up in court as a shareholder lawsuit.
There are pieces of Bear that Morgan can use. Don’t know if they’re worth $2 billion, tho.
It is a great move by Morgan, because as a part of this deal, it appears that the federal government will assume most of the risk of the deal, while JP Morgan will get the assets.
JPM almost bought Bear Stearns previously, has done alot of diligence. Bear Stearns building in mid-town is worth almost 1 billion, private brokerage is worth another billion, rest might be a wash. The Fed engineered the shut-down of LTCM in the ‘90’s as well.
Bear Stearns is the most exposed Wall Street firm in sub-prime/alt-A market. Very dependent on it. The reason they failed is an asset run by counter-parties last week. Nobody wants to leave assets in a bank that might go under, so there was a white-shoe run on the bank by it’s hedgie and PE customers. JPM is not in that position.
It’s done....$2 per share!!!!!!
$2 PER FRIGGIN SHARE!!!!!
Does this mean Joe taxpayer is taking a chance on the buyout? - tom
Honestly, it really is the best thing at this point. Financial markets are the foundation of free-market capitalism, but paradoxically are built on a completely artificial foundation which is necessarily constructed by government. Liquid money is an unnatural thing, incapable of existing without government, but capitalism couldn't function without it.
This is a situation where tremendous speed is necessary in order to prevent catastrophic effects on the financial markets, in which the painful consequences will be distributed without correlation to guilt. These paragons of capitalism -- JPM and Bear -- are heavily regulated entities to begin with. The normal legal process to arrange an acquisition of one by the other would involve months of negotiations, legal opinions, shareholder suits, regulatory approvals, and accounting work. What the government is doing by brokering this is enabling the firms to cut through virtually all of the red tape, to do what they want to do anyway, about a thousand times faster.
At the start of the week BSC shares where $65...taken over at $2
Down from 170 last summer I think...WOW!
It’s not clear that there will be any “handouts” here. And any guarantees that end up having to be paid by the taxpayers (and there might not be any, if all goes as hoped) would not be likely to exceed what the taxpayers would end up paying through other avenues, if the huge financial market disruption that would be caused by the unrescued failure of Bear, actually occurred. When dozens of smaller banks start going under as part of the ripple effect, millions of FDIC-insured account-holders will get their $100,000 from the taxpayer.
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