wally writes:
"a risk discipline that was very similar to our own."

I'm comforted. Ha.
wally | 03.17.08 - 11:01 am | #

Tim writes:
So if it had not been such a well-run operation it would have been worth maybe $.01/share?
Tim | 03.17.08 - 11:03 am | #

CalculatedRisk writes:
Wally, yeah - that was my reaction last night. Is that good news?

Best Wishes.
CalculatedRisk | Homepage | 03.17.08 - 11:03 am | #

Average Joe writes:
"arrange for financing through the Federal Reserve and again with no recourse to JPMorgan Chase"

Forget shorting wallstreet, how do you short mainstreet?
Average Joe | 03.17.08 - 11:03 am | #

Just Some dumb guy writes:
non recourse means gift not loan correct?
Just Some dumb guy | 03.17.08 - 11:03 am | #

Pondering the Mess writes:
Watch the Plunge Protection Team drive the stock market up into the green! Bank failures are good for the economy! Everything is contained! Buy now or be priced out forever!

How long can this stupid BS continue?! Everything else tanks, but the US goes up because our banks are failing - does anybody buy into this nonsense anymore!
Pondering the Mess | 03.17.08 - 11:04 am | #

Begbie00 writes:
Good risk controls? I'm not in the banking industry, but is that phrase usually used to describe companies that lose ~93% of their value in a week?
Begbie00 | 03.17.08 - 11:04 am | #

safe_as_apartments writes:
Average Joe: Short Main Street by selling dollars.
safe_as_apartments | 03.17.08 - 11:04 am | #

Doofus writes:
How the rest of the planet's markets tank, yet the US's--the source of the mess--go green today?

WTF?
Doofus | 03.17.08 - 11:07 am | #

Newton writes:
BSC trading @ 4.06$ at the moment. What in heaven are they thinking?

JPM won't possibly shore up its offer.
Because then they will raise doubts if they got BSC too cheap alltogether and BSC shareholders will demand more..
Newton | Homepage | 03.17.08 - 11:09 am | #

Average Joe writes:
"The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated further in March. The general business conditions index fell another 10½ points to -22.2, a reading that eclipsed the record-low of -19.6 set in November 2001"

While no one was looking....

This news alone would have driven the market down more than it is now...

It is obvious that forces outside a general understanding of stock value related to future earnings is at play here.
Average Joe | 03.17.08 - 11:09 am | #

s writes:
How can we get into the index futures and check the trading patterns. There has been lots of talk about the PPT using index futures to drive the market higher. Agree thisn is getting sureal. Not to mention the idiots on CNBC telling us we are bottoming.
s | 03.17.08 - 11:10 am | #

BG writes:
Lewis is going to vote "No".
BG | 03.17.08 - 11:10 am | #

Anonymous writes:
The definitive guide to the PPT:

MOVE OVER, ADAM SMITH: The Visible Hand of Uncle Sam

http://www.sprott.com/pdf/ TheVis...VisibleHand.pdf
Anonymous | 03.17.08 - 11:10 am | #

Lionel writes:
"a risk discipline that was very similar to our own."

Am I the only one who thought about shorting JPM when they saw that?
Lionel | 03.17.08 - 11:11 am | #

Nemo writes:
An important issue is getting lost in the noise... The Fed is opening the discount window to primary dealers and letting the clearing banks price the collateral.

Do not miss Willem Buiter's piece today:

http://blogs.ft.com/maverecon/20...es-for-the-fed/
Nemo | Homepage | 03.17.08 - 11:14 am | #

ebolabrahmin writes:
Are tax payer dollars being used to buy up these "illiquid assets, largely mortgage-related"? Forgive me, I am can't seem to parse this one. Are the tax payers taking on this crap as collateral?
ebolabrahmin | 03.17.08 - 11:14 am | #

baba writes:

Am I the only one who thought about shorting JPM when they saw that?

Nope, cause I really don't see any upside risk, even considering the $30billion that we've gifted them, why doesn't someone give me $30Billion?
baba | 03.17.08 - 11:15 am | #

dude writes:
Ace "Ventura" Greengerg sure brings new life the the expression:

"C H I T T Y..."

The comparisons on the way BSC was recently run over the last few years and the driving scene from the movie are just too close. Art does indeed simulate life.
dude | 03.17.08 - 11:15 am | #

Outsider writes:
So Joe Lewis is out $1B. Does he have any recourse?

And who else were the big investor losers in this?
Outsider | 03.17.08 - 11:16 am | #

Average Joe writes:
When Bear is gone, and thousands are fired, and life goes on, will anyone ask what value the company really had. I mean what services justified the incredible cost to support 15000 salaries with huge bonuses, all the rent, equipment, and other overhead? If they disappear and no one misses them that why is the company worth anything. Isn't everyone (besides BS) better off without paying the costs to support a company that we can obviously live without. We are learning that the huge rake of Wallstreet isn't worth it. When the average joe realizes that his 401k is just a fancy way to support thousands who skim off a little as they needlessly move money around and pretend they are providing a valuable service.
Average Joe | 03.17.08 - 11:17 am | #

FLL Renter writes:
Kevin Ing - Columbus Hill Capital Management - Analyst
And given that you believe that Bear marked their portfolio consistent with the way you guys marked your portfolio, do you
believe that -- do you really believe the book value? Or do you believe the book value that they stated I guess on the Friday call
of being the mid 80s? I'm just trying to reconcile that with the $2 a share.


Bill Winters - JPMorgan Chase - Co-CEO, JPMorgan Investment Bank
I think Mike took you through what the contributors were to the final price that made sense for JPMorgan shareholders. It's an
art, not a science and it can't be reconciled back penny for penny. But there's a thousand moving pieces including all the moving
pieces over the weekend that are reflected in the final price that JPMorgan has agreed to pay.



How to explain the overnight destruction of billions of $'s in market cap? "It's an
art, not a science"

Nice
FLL Renter | 03.17.08 - 11:17 am | #

Banks Own it ALL writes:
so who rules the world, JPM or GS

coulda sworn it was GS.
Banks Own it ALL | 03.17.08 - 11:19 am | #

Outsider writes:
When the average joe realizes that his 401k is just a fancy way to support thousands who skim off a little

Yeah, and you woulda thought maybe the last time everyone's retirement acct took a dive - in the tech crash - some would have started connecting the dots.
Outsider | 03.17.08 - 11:20 am | #

dfrmWPBfl writes:
If BSC's risk controls are in line with JPM and they are confortable with what they are buying. What did they offer just $2/share?

Considering they are getting the assets for free ( Building worth $1B+)
why does it seem like a lot of people are getting screwed here. Not just the US Tax payer. The working stiff and his pension to name a few.

JPM's Access to cheap money is an unfair advantage. Since they are now opening the door to broker dealers why didn't the fed offer the same financing options to Bear. They didn't have to ruin the retirement of 18,000 employees. Only the top 200 - 500 hundred.

Talk about throwing the baby out with the bath water?
dfrmWPBfl | 03.17.08 - 11:21 am | #

Shylock writes:
I too would be pleasantly surprised if I received a $30b nonrecourse loan to buy a competitor. As a taxpayer, I am reminded of a song entitled "She got the mine and I got the shaft".
Shylock | 03.17.08 - 11:23 am | #

Elvis writes:
Something here seems very sinister. I smell something very bad.
Elvis | 03.17.08 - 11:23 am | #

NC Jim writes:
When will the rating agencies downgrade te Fed given the deterioration of it's balance sheet? First the poor collaterial it is swapping for treasuries and now $30B in crap from BS.

Oh wait... there is that printing press thingy.

It's good to be the King (Hat Tip - Mel Brooks).

Jim
NC Jim | 03.17.08 - 11:25 am | #

John Stark writes:
Many have insisted that Bear's problem was not that its portfolio was not performing. The problem, it has been said, was FEAR that it might not perform in the future--the market price of its stuff was way down on that fear, and this triggered a run on Bear that pushed it down from Monday to Friday last week. That is what the SEC said in its Friday press release on the topic.

http://www.sec.gov/news/press/20...008/2008- 44.htm

"As of its most recent capital calculation as of the end of February 2008, Bear Stearns' holding company capital exceeded relevant regulatory standards. According to the information supplied to the SEC by Bear Stearns as of Tuesday, March 11, the holding company had a substantial capital cushion. In addition, as of March 11, the firm had over $17 billion in cash and unencumbered liquid assets.

"Beginning on that day, however, and increasingly throughout the week, lenders and customers of Bear Stearns began to remove funds from the firm, despite its stable capital position. As a result, Bear Stearns' excess liquidity rapidly eroded.

Many commenters here, however, scoff at the notion that Bear's assets had any value. Why is that? Just asking.
John Stark | 03.17.08 - 11:26 am | #

John Stark writes:
I do think that JPM is just make-believe. Bear has been nationalized. The fed has already said it is going to manage the portfolio that Bear has supposedly acquired with its "non-recourse" loan, the mother of all subprime mortgages.
John Stark | 03.17.08 - 11:28 am | #

Stuart writes:
Do these bozos live on a different world and think all us Earthlings are dumb ass stupid. If if was really well run with good risk controls why the hell was it only worth 2 bucks a share??? Somebody has to call these guys out on this and tell them to quit spewing the BS around thinking it will stick. If Bear's risk discipline was similar to "our own", I'd sure as hell be selling any JPM stock I owned. That type of risk discipline we don't need. Total BS conf call.
Stuart | 03.17.08 - 11:28 am | #

Banks Own it ALL writes:
Becasue the asset's are traading cards printed on TP. and we don't know if it's fresh or used.
Banks Own it ALL | 03.17.08 - 11:28 am | #

swampfella writes:
"tight operation with good risk controls"

once knew a girl with the same attitude...Zelda...and a lot cheaper than Spitzer's ladies.

You had to pay extra if you eschewed the condom. Even more if she chewed it.
swampfella | 03.17.08 - 11:29 am | #

Abe, NYC writes:
It's not just about BSC, all of the investment banks are a case of the tail wagging the dog. Banks exist to service the real economy, not the other way around! That's how it used to be, and that's how it should be. But in the US, particularly in the last 5 years or so, the real economy became an adjunct to finance, just like GM was at one point becoming an adjunct to GMAC. Now things will get straightened, and it will get ugly... (hint: watch Manhattan real estate market)...
Abe, NYC | 03.17.08 - 11:33 am | #

John Stark writes:
JPM pays $2 a share for Bear, but the fed pays $30 billion and manages the portfolio. Who's paying what, for what, exactly? Who's got the bearskin on the den floor by the fire?
John Stark | 03.17.08 - 11:34 am | #

Alex writes:
Changing the Benchmark

Sedaca called the insolvency of BSC and LEH a week ago today.
Alex | Homepage | 03.17.08 - 11:34 am | #

luke writes:
Since it was a stock for stock deal, if the risk controls are the same at JPM as they were at BSC, then perhaps JPM really paid around $0.10 per share, or will have once its own stock loses 95% of its value. At that price it may be really worth it. Pity about that 30 billion the rest of us put up though.
luke | 03.17.08 - 11:35 am | #

Canadaman writes:
"a risk discipline that was very similar to our own."

I think the really interesting point is that JPM just PRICED themselves, MS, LEH, GS and all the other IB's holding mark to fantasy assetts at under $5 or so a share with their steal of BSC
Canadaman | 03.17.08 - 11:39 am | #

John Stark writes:
But what's the real price for Bear? $2 a share from JPM, or $30 billion from the Fed???
John Stark | 03.17.08 - 11:41 am | #

Sebastian writes:
John Stark asked: "Many commenters here, however, scoff at the notion that Bear's assets had any value. Why is that?"

That's a reasonable question. Change the situation to this hypothetical: What if the Fed had been willing to accept stocks as collateral on the day after the October, 1987 crash? Is an asset that is illiquid because of transitory fear the same as an asset that is literally non-performing and never will be, no matter what?


S.
Sebastian | 03.17.08 - 11:42 am | #

John Stark writes:
[W]e have put in place with the Federal Reserve a special lending facility. It's a non-recourse facility to JPMorgan Chase for up to $30b or so of illiquid assets, largely mortgage-related. So that is in doing our due diligence an area that we needed to get comfort upon, was some of the more illiquid assets on the balance sheet. So obviously couldn't be in stronger hands than to be -- arrange for financing through the Federal Reserve and again with no recourse to JPMorgan Chase.

Could this perhaps mean "Shoot, we had like 24 hours to do our DD on one big enchilada. But who really cares? Somebody else was paying for it, willing to accept Bear itself as collateral for $30 billion, so our risk is zero whatever happens."
John Stark | 03.17.08 - 11:44 am | #

John Stark writes:
One more time: JPM is in this deal in hopes that the headline will read:

"JPM takes over Bear Stearns" instead of "Feds nationalize major Wall Street firm."

Mission accomplished.
John Stark | 03.17.08 - 11:46 am | #

Allen C writes:
From transcript -

"Guy, we're very comfortable with the level at which Bear Stearns had marked the positions, broadly consistent with JPMorgan."

Hmm...So is the Fed bailing out both?
Allen C | 03.17.08 - 11:47 am | #

Allen C writes:
Does anyone have any details regarding the Fed financing arrangement?
Allen C | 03.17.08 - 11:48 am | #

DuckVader writes:
"However, it would be a mistake to allow clearly bankrupt banks to remain open, as this would be a recipe for perpetuating the financial crisis, not resolving it. The best course is to recapitalize or close insolvent banks, protect small depositors, and require shareholders to take their losses. At the same time, banking regulation and supervision must be improved. Of course, we take individual country circumstances into account in deciding how quickly all of this can be accomplished."

-- Stanley Fischer on the Asian financial crisis.

http://www.imf.org/external/np/s...1998/ 012298.htm
DuckVader | 03.17.08 - 11:48 am | #

scotty_at_the_helm writes:
Re: e were very pleasantly surprised to see that it was a very well run, tight operation with good risk controls and a risk discipline that was very similar to our own.

Total fraud, collusion and corruption! Nothing more!
scotty_at_the_helm | 03.17.08 - 11:52 am | #

Unsympathetic writes:
" scoff at the notion that Bear's assets had any value "

Stark, please do some Googling of Bear's mortgage holdings.

Bear was the second-largest institutional holder of Alt-A securities. You may know them by the phrase "liar's loans."

Example of a liar loan: I walk off the bus into a bank, sign a piece of paper saying I make $100,000 annually, and walk back to the bus with a mortgage on a $1.5M home. Due diligence on my claim that I earn $100,000 per annum? Zip.

It's not surprising that Bear went boom. NOT ONE BIT. This was inevitable from the second margin calls began to go out. Not coincidentally, Bear hadn't paid a margin call since the Saturday before last.. and so firms stopped trading with them. Caveat emptor, JPM.
Unsympathetic | 03.17.08 - 11:52 am | #

fred writes:
sigh

no, we didnt nationalize bear, its worse. if we nationalized their portfolio, we'd get the upside (at least the differential between par and market or strike of the "put" or whatever the lending valuation is).

we gave a free put to jpm. a really long term put. really really long term. probably close to at the money. on assets that can't be priced.

there is no upside here (bad as it was, the govt at least made a profit on chrysler)
fred | 03.17.08 - 11:55 am | #

Alec writes:
What if the Fed had been willing to accept stocks as collateral on the day after the October, 1987 crash? Is an asset that is illiquid because of transitory fear the same as an asset that is literally non-performing and never will be, no matter what?

And this comes down to risk management. BSC acted like they were a 3 meter boat on mildly choppy water when in fact they were The Posiaden(sp?) in a perfect storm. This was no rogue wave, you could see this comin in a cab from downtown*.

If the clowns working for Bush talked tougher in the early days then maybe the IB's ouldn't be playing game theory and they woulda come to Jesus.

Now BSC stepped on a rainbow.

* +1 MMI
Alec | 03.17.08 - 12:01 pm | #

scotty_at_the_helm writes:
Re: Federal Reserve is trying to restore confidence

Nah, The Fed is involved in antitrust manipulation and creating dis-trust!
scotty_at_the_helm | 03.17.08 - 12:03 pm | #

ipodius writes:
Is an asset that is illiquid because of transitory fear the same as an asset that is literally non-performing and never will be, no matter what?

And therein lies the rationale behind the entire action. Just because Bear was insolvent (btw, meaning cash impared to the extreme) doesn't mean that Bear didn't have some juicy stuff sitting in there that is worth money at some point when the panic dies down. And now this is what you are seeing. Smart people know all this stuff isn't worth nothing. So why not pick up some value at firesale prices? Especially when the Fed is giving you a line of credit to do it?

The lack of cogent analysis is really stunning on these threads. Especially when most here know better. And also there was a lesson in this because who is the bearer of most of the destruction? The shareholders and execs who have the options/stock. And that's the way it should be.
ipodius | 03.17.08 - 12:05 pm | #

safe_as_apartments writes:
Looks like Sebastian just finished his massive morning futures buy; the market is now tanking.
safe_as_apartments | 03.17.08 - 12:08 pm | #

Troy writes:
the market is now tanking

Man SDS is a beautiful part of a well-balanced portfolio ;)
Troy | 03.17.08 - 12:12 pm | #

Sebastian writes:
safe_as_apartments said: "Looks like Sebastian just finished his massive morning futures buy; the market is now tanking."

That wasn't me.:) I bought at the January low and I'll be buying some more once I find out what color smoke comes out at the end of the Fed meeting.:)


S.
Sebastian | 03.17.08 - 12:17 pm | #

REBear writes:
It's high time Consumer Services (double dip - SCC) started tanking. Best Buy is still trading near 40!
REBear | 03.17.08 - 12:24 pm | #

Begbie00 writes:
ipodius: Yes, we all know (or hope) it's not worth $0. Our point is that for JPM to get up there and say that BSC had "tight risk controls" is laughable, especially since some of the most public failures (e.g. the 2 hedge fund failures) in this whole mess have been BSC's.
Begbie00 | 03.17.08 - 12:29 pm | #

Ziggurat writes:
Finally Ipodius.....

Some one is noting that wiping out the equity holders of BSC is a positive. Do you think any of them are going to feel like they were 'bailed out'?

It is exactly as it should be.
Ziggurat | 03.17.08 - 12:30 pm | #

WillyK writes:
Speaking of surreal - watched about two hours of CNBC Squawbox Europe overnight which consisted of massive doses of heady realism, i.e. chickens coming home to roost, is this like Japan?, etc. - then wake up to the dog and pony show of US Squawbox where everything is rosy and we've hit bottom. Wtf, did I fall through a black hole?
WillyK | 03.17.08 - 12:30 pm | #

a different chris writes:
>So why not pick up some value at firesale prices? Especially when the Fed is giving you a line of credit to do it?

'Kay, Logical enough.

But, if you want to think that you gotta then ask:

So where were the other bidders?
a different chris | 03.17.08 - 12:31 pm | #

sterlingerl writes:
Meredith Whitney, stirring up trouble again...

http:// business.timesonline.co.u...icle3567812.ece

Meredith Whitney, the Wall Street analyst who received death threats after writing a negative report about Citigroup, has predicted that financial stocks could plummet by as much as half in the wake of the Bear Stearns fire sale.

In a note released today, the Oppenheimer analyst says Merrill Lynch, UBS and Citigroup will be the worst hit. Lehman brothers shares are already down 30 per cent in pre-opening trading.
sterlingerl | 03.17.08 - 12:32 pm | #

Ziggurat writes:
As for the 'what is it worth' comments, JPM is booking $50 per BSC share for transition costs. I'm sure that this number is what they think x 2.
Ziggurat | 03.17.08 - 12:34 pm | #

Ziggurat writes:
Anyone pick up the 'conforming accounting' item in the transition costs?

Is this what it will take to align the JPM/BSC transactions? IE, mirror accounting?
Ziggurat | 03.17.08 - 12:36 pm | #

ipodius writes:
for JPM to get up there and say that BSC had "tight risk controls" is laughable

Did you think this meant from an investment standpoint, or from an internal controls standpoint? I read it as an operational statement, not reflective as to the quality of the investments.

Ziggurat, I think you are correct. I'd say that for the deal to make sense, they had to figure that when all is said and done, they'll get about $20 a share for the $2 investment. That would make the deal worth it, especially when the Fed gave them a line of credit to unwind so that it didn't affect the current business.
ipodius | 03.17.08 - 12:38 pm | #

ajn writes:
JPM stock up 10% is telling you that they just took out BSC at way way under book value at a steal of a deal.
ajn | 03.17.08 - 12:39 pm | #

John Stark writes:
from Fred:

no, we didnt nationalize bear, its worse. if we nationalized their portfolio, we'd get the upside (at least the differential between par and market or strike of the "put" or whatever the lending valuation is).

we gave a free put to jpm. a really long term put. really really long term. probably close to at the money. on assets that can't be priced.

On further review, this is what I think too. We only nationalize it if the worst-case scenario materializes and the portfolio really is worth just pennies on the dollar. If that happens, JPM mails Ben B. the keys.

But if conditions stabilize,( most people keep paying their mortgages, and the portfolio's market value recovers,) then JPM eventually pays Ben back and gets the company out of hock.
John Stark | 03.17.08 - 12:41 pm | #

Ziggurat writes:
jpm had to get a good deal. Or else we will be doing this all over again.

For them to be getting 'too good of a deal' is much preferred them for them to be taking on an anchor.

Plus at +10%, BSC shareholders are getting another 20 cents.
Ziggurat | 03.17.08 - 12:42 pm | #

saul writes:
scary

http://www.europac.net/Schiff-FB...-3-14- 08_lg.asp
saul | 03.17.08 - 12:44 pm | #

Stinky writes:
If Wilmington Trust is holding a huge block of shares for executive compensation, who gets to vote those shares?
There are a lot of pissed off shareholders who might not vote to be acquired, especially if Bear can go right to the FED for money now.
Cayce has lost about 390 million in the last week or so. I wouldn't be positive he quietly lets them put the rag over his mouth.

Hell I'd rather be Spitzer than him this week.
Stinky | 03.17.08 - 12:51 pm | #

s writes:
jpm is a useful idiot for the fed. Jamie dimon isn't brilliant he is the only bank left with any credibility and he happened to be there. Their notional derivatives portfolio is a timebomb hence the forthcoming white paper to explain why CDS is completley misunderstood.
s | 03.17.08 - 12:53 pm | #

REBear writes:
The IRS says it will start sending 130 million tax rebates on May 2 aimed at stimulating the economy
REBear | 03.17.08 - 1:00 pm | #

NC Jim writes:
Quote of the day candidate compliments of The Big Picture.

The NY Yankees paid more for A-Rod than JPM paid for Bear Stearns

Jim
NC Jim | 03.17.08 - 1:04 pm | #

Begbie00 writes:
I'm not sure I understand the distinction.

If you took $1.00 from shareholders and turned it into $0.02, you have bad risk controls AND you made bad investments (since you measure good risk controls by, amongst other things, their ability to help you avoid catastrophic risk).

Saying that the investment is still worth $0.02 on the dollar (rather than $0.00) is little consolation.
Begbie00 | 03.17.08 - 1:05 pm | #

Kicker writes:
And therein lies the rationale behind the entire action. Just because Bear was insolvent (btw, meaning cash impared to the extreme) doesn't mean that Bear didn't have some juicy stuff sitting in there that is worth money at some point when the panic dies down.

How exactly do you value even a plain vanilla MBS in this environment? Let alone a CDO.

Duration is increasing because the mortgage market is still effectively frozen.

Allow a bit more inflation long term and the duration increases even more at the same time bonds are getting slaughtered.

Tip into a severe recession and the collateral deteriorates in value.

There are very few firms that can correctly value this stuff. And even then it's only attractive if they can hedge the risks (like selling short Treasuries to hedge interest rate risk) and leverage up to increase yields.

Unfortunately, those leverage and hedges aren't working out so well these days (ask BSC). Who would have guessed that 10 Year Treasuries would be trading near 3% with commodities going parabolic and gold at $1000.

If it were just a matter of "return-of-principal" we wouldn't be seeing increasing spreads on GNMA (that have an explicit government backing).
Kicker | 03.17.08 - 1:07 pm | #

Alec writes:
Stinky,

If I have a choice between 2 and zero, I take 2.

S,

JPM's derivative exposure is effectively zeroed out, their only exposure is either countrparty risk or a failure to clear. They just took care of the latter.
Alec | 03.17.08 - 1:07 pm | #

saul writes:
http://krugman.blogs.nytimes.com/
saul | 03.17.08 - 1:11 pm | #

wally writes:
There seems to be some lingering sentiment (hope?) that things really weren't all that bad at Bear and that value is still there, etc. etc.

I don't think so. I think, given the circumstances and actions, that it is likely to be worse than it seems, not better. JPM may have bought to cover itself against the consequences to itself of a BSC BK... namely: they may have felt like a domino.
Who will but Lehman? Citi? UBS?
wally | 03.17.08 - 1:19 pm | #

Stinky writes:
I'm not sure its a choice between zero or two.

I'm thinking with $30b in fed funding behind me I'd like to bid $2.25.

The value to JPM is the offsetting derivatives, some one else might like to buy the building. Another guy might actually want that mortgage portfolio at $.10 on the dollar.

It wouldn't be the first time a company was worth more in pieces than as whole.

JPM kicked Thornburg in the nuts a week before they were to be able to solve some of their liquidity problems and now JPM lays a hatchet into the back of Bears head a couple of days before the fed allows dealers direct access. Meanwhile Goldman is awfully f'n quiet.

I'm not really clear on this massive danger in having Bear go into receivership and clearing in an orderly fashion.

Of course when you smell like I do no one wants to get close enough to explain.
Stinky | 03.17.08 - 1:40 pm | #

andrew writes:
http://biz.yahoo.com/rb/080317/ bearstearns_mood.html:

"To add insult to injury, Bear Stearns does not offer payouts, known as 'golden parachutes,' for executives in the event of it being taken over."

That's "adding insult to injury"? How about, "Justifiably, Bear Stears does not further reward the idiots who got them into this mess."
andrew | 03.17.08 - 2:19 pm | #

Alec writes:
Stinky,

I hear ya, but BSC had from May to play defense and they spent the time playing chicken w the Fed. So they got wound down in a hurry, nodoby to blame but management.

So JC Flowers comes to BSC and says "we'll pay $2.25 in a Prepack BK" while the Fed has gun pointed at your head and an itchy trigger finger.

JC Flowers has yet to arrange financing and doesn't have the pockets to backstop your losses, so it's this:

Maybe $2.25 that will take too long to maybe happen;

$2 that will defintely happen in 90 days and a backstop;

$0 in BK/liquidation that will take years to happen.

So with future value of money & risk, $2.25 isn't better than 2.
Alec | 03.17.08 - 3:04 pm | #

Stinky writes:
Allright, I'll buy that.
Stinky | 03.17.08 - 3:34 pm | #

bruiser writes:
I still don't get it. The Fed gave J.P. Morgan $30B to buy Bear Stearns, and JPM made a $250M bid on BSC. Where did the rest of the money go?
bruiser | 03.17.08 - 9:55 pm | #