Regardless of any other details, on March 16 the Federal Reserve gave $28 billion dollars to JP Morgan so they would “buy” Bears Stearns.
As the chart below illustrates, a non-recourse loan of $29 billion (the extra $1 billion JPMorgan may have to repay) was given to JP Morgan. To add insult JP Morgan still retains the right to any profits from the Bears Stearns collateral.
Oh…and on the jump from $2 to $10 a share for this bail-out; it reminds me of the scene from “Blazing Saddles” when the sheriff takes himself hostage.
Bear must have said “Give me more money or the Bear gets it”
NEW YORK (Reuters) – Bear Stearns Cos shares fell nearly 5 percent on Friday after Chairman James Cayne, who was seen as opposing JPMorgan Chase & Co’s acquisition of the investment bank, sold his stock.
This represented $900 million plus in paper losses for Mr. Cayne and is viewed by many as signaling the end of negotiations for a better deal by Bear Stearns.
Since the JP takeover was an all stock deal why not hold the onto your Bear shares until you get the JPMorgan shares; unless of course you think JP Morgan’s stock is going down before the deal closes.
If money talks, then Mr. Cayne’s money is telling us the financial pain isn’t over yet.