Sunday, March 16, 2008

JP Morgan Chase to Buy Bear Stearns for $2/Share

From The Wall Street Journal.Com:

Bear Stearns Closes in on Deal
To Sell Itself to J.P. Morgan
March 16, 2008 5:56 p.m.

Bear Stearns Cos. was closing in on a deal Sunday afternoon to sell itself to J.P. Morgan Chase & Co., as worries deepened that the financial crisis of confidence could spread if Bear failed to find a buyer by Monday morning.

People familiar with the discussions said all sides were pushing hard to complete an agreement before financial markets in Asia open for Monday trading. "None of these things is done until they're done," Treasury Department spokeswoman Michele Davis said Sunday afternoon. "But I think everyone's expectation is sometime in the early evening hopefully" the deal will be done.

Terms of the deal were still being hammered out Sunday afternoon. Reflecting the dire situation at Bear, the company is likely to fetch considerably less on a per-share basis than its stock price of $30 in New York Stock Exchange composite trading Friday at 4 p.m. Last year, the shares hit $170.

One stumbling point appeared to be the amount of risk that J.P. Morgan would absorb in any type of transaction. While J.P. Morgan is eager to snap up some of Bear Stearns assets -- such as its prime brokerage business that caters to hedge funds -- Chief Executive Officer James Dimon was reluctant to pursue the deal without certain assurances that would protect his firm's exposure, said people familiar with the matter.

Despite the emergency funding from J.P. Morgan and the Federal Reserve that was announced Friday and gives Bear access to cash for an initial period of 28 days, the clock is ticking against the 85-year-old company. Regulators, bankers and investors are concerned that the firm could plummet even further when markets open Monday. A continued exodus by parties that Bear trades with could even cause the investment bank to collapse.

Federal regulators also are trying to prevent Bear's crisis from mushrooming into a systemic threat to the stability of financial markets and other securities firm, for which confidence is essential to their ongoing operations. Unwinding Bear also would be a nightmare because it trades with nearly every firm on Wall Street.

This is a pretty big story, and I would say tune into all the business channels to see how the market reacts. It's bad out there, folks. And getting worse by the minute.


john said...

Who really though that positive blip earlier this week was a sign of better things to come? Think again. We believe we are in for a rough ride and there is more of this to come. Tip of the iceberg? We hope not. Be ready for an extended period of rocky hedge fund employment waters.

Hedge Fund Jobs

I am not Star Jones said...

don't laugh at me but maybe this news will help Americans snap to the reality that the economy is
in freefall and stop thinking about a prostitute's singing career and other nonsense?

Constructive Feedback said...

Bear Sterns and other entities that are experiencing trouble WERE OVER EXPOSED IN THE MORTGAGE GAME. They put money out at the time in order to GET A SOLID STREAM OF MONEY IN.

When the market burst due to the bad loans that were packaged in with the good - their greed and overexposure lead to their eroded position.


The risk managers inside of Bear Sterns, Merill, CitiBank, Countrywide, etc were not doing their JOBS. Indeed it is tough to put on the breaks when it seems like there was a nice, smooth ride in front of you as the housing prices increased and people took money out of their homes in second mortgages, often to pay off their credit cards. SURELY someone had to see that as with any market bubble the POP would be costly.

I hope that the Federal government does not intervene. Japan's woes during the 90's were extended far beyond their natural rate because the GOVERNMENT attempted to defend against the bottom.

THESE ARE MARKETS FOLKS - they are cyclical in nature.

The best thing that you can do as an individual is to GET OUT OF DEBT - primarily credit card debt. You then have your own future more closely in your own hands, not being "owned" by anyone else.