Bear races to forge deal with JPMorgan

Source: Financial Times



Read more: http://www.ft.com/cms/s/e2206ed2-f380-11dc-b6bc-0000779fd2ac.html

I have problems with the collateral on the loan.


The Fed can normally only lend through its discount window to banks. Under Section 13-3 of the Federal Reserve Act, added in 1932, it can lend to “individuals, partnerships, or corporations” with the approval of not less than five governors, provided “such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions.”

However, under Section 11(r)(3)(ii)(I), approval can be granted with fewer than five governors in office if the “available members unanimously determine that … unusual and exigent circumstances exist and the borrower is unable to secure adequate credit accommodations from other sources” and “despite the use of all means available (including all available telephonic, telegraphic, and other electronic means), the other members of the Board have not been able to be contacted on the matter.”

Officials said the Fed used its authority to lend to nonbanks several times during the Depression. It was invoked at times during the 1960s but it wasn’t clear if money was ultimately lent in those latter instances


http://blogs.wsj.com/economics/2008/03/14/fed-invokes-depression-era-law-for-bear-loan/?mod=fpa_blogs

In other words, protect us and our billion dollar annual bonuses from ourselves.

:grr:

They must be very, very afraid of what might happen on Monday.








"With Bear’s shares sharply lower and its liabilities unknown, JPMorgan could end up paying very little to acquire the firm. Bear’s market value has plunged to just $3.5bn from a peak close to $20bn in January last year, largely because of frenzied selling of its shares in the past week.

The value of Bear’s head office in a prime location on Madison Avenue, near JPMorgan’s offices, may account for a big portion of the eventual sale price."

is that these clowns are actually working (not that they actually work) on the weekend. Goodness who would have thought things would get so bad, that they would have to sit in some cushy conference room and try to work out a deal? I hope they can take some extra vacation time later to make up for this......



:sarcasm: :sarcasm: :sarcasm: :sarcasm: :sarcasm: :sarcasm:

Investment bankers work 100 hour weeks every week - and many times they work 110-120 hours per week. Granted, that is what the juniors have to do until they establish themselves, but then 80 hours becomes the norm after they are more established. The traders work 45-75 hours per week, but the hours are far more hyperintense with the phone ringing off the hook, excel macros to program, trades to make, scanning for news headlines and filtering the necessary tidbits you need, reading analyst reports, talking to analysts (not that their ratings are useful, but they can at least fill you in on the story behind the stocks so that you can do your own research), calling all sorts of people to get color on the stocks that you care about as they whip around, trying to think of new strategies, dealing with IT's regular fuckups, making sure the backoffice guys are not fucking up, maintaining relationships with your sales traders, making sure the PnL is correct and a whole host of a million other little things - this is hardcore multitasking that neverstops. There is barely a minute to breathe....but I do get to take five minutes to go downstairs, buy my lunch, and then come back upstairs to eat it at my desk!

Source: Reuters

JPMorgan Chase & Co is close to rescuing the fifth-largest U.S. investment bank, Bear Stearns Cos Inc, a person familiar with the matter said on Sunday, in a deal that could be announced in the next few hours.

The Wall Street Journal said on Sunday that Bear Stearns could sell itself for around $2.2 billion, or less than $20 a share.

The low sale price, equal to about two-thirds the company's $30.85 closing share price on Friday, signals just how dire the situation is for the 85-year-old investment bank.

The deal with JPMorgan Chase has not been signed yet, said the person Reuters spoke with on condition of anonymity.



Read more: http://www.reuters.com/article/topNews/idUSN1438968020080316

WSJ reports: "all sides were pushing hard to complete an agreement before financial markets in Asia open for Monday trading".

Don't think it is going to help.

Stock market forums on the web are very jittery.

From Bloomberg:

March 16 (Bloomberg) -- Bear Stearns Cos. executives were striving today to strike an agreement to sell the crippled securities firm to JPMorgan Chase & Co. before financial markets open in Asia, people with knowledge of the talks said.

The companies may announce an agreement in principle as soon as this evening in New York, giving a range of potential sale prices and leaving details of the transaction unresolved, said the people, who declined to be identified because the talks are private.

-------------------------------
The fact that they want an announcement before the Asian markets open, infers that there is going to be global panic in the markets unless some 'good news' is announced. As of 6:50 PM EDT, no announcement has been made, and Asian markets are opening up in less than two hours.

It is going to be a rather interesting week on Wall Street.

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/03/16/financial/f161218D40.DTL&feed=rss.business

JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million — or $2 a share — a stunning collapse for one of the world's largest and most venerable investment banks.

The last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system.

The Federal Reserve and the U.S. government swiftly approved the all-stock deal, showing the urgency of completing the deal before world markets opened.

Bear Stearns shares close Friday at $30 a share. At their peak, the shares traded at $159.36.

I mean, what specific things that happened that lead up to this? I am having a hard time finding a timeline. Thanks.

:rofl: