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Bear Stearns

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TheoPrinsloo
Contributor
Hope this is not a stupid question but why does JP Morgan have to bail out Bear Stearns instead of using the $200 billion that the FED announced just a couple of days ago will be made available to financial institutions.
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24 REPLIES 24
DST
Super Contributor
JPM & Fed are close, very close. They are probably doing it very together, with a preponderance of JPM chutzpah and of Fed risk absorption. (remember the post-Saambou type of arrangements here?).
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Tango
Super Contributor
This is about as low-risk as it gets for JP Morgan Chase... a couple of days ago, Bear was trading around $50/share. JP is now picking them up for $2/share, and the Fed is backing them up, saying they will lend any of the banks an unlimited amount of real dollars and take any old cr@p as collateral.
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TheoPrinsloo
Contributor
looks like FED saw the trouble and then decided who it wants to buy Bear Stearn. JPM was the winner. Fishy!
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TheoPrinsloo
Contributor
Anny comment on how hard this will hit our banks today!
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john_1
Super Contributor
$2 thats unbalievable..I thought they lost half their value. On Friday they were trading at R20 somthing if I am not mistaken...Geez imagine the losses to Joe Soap Minor investor.
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Werner_1
Super Contributor
Yes, Jamie Dimon (CEO & President of JPM) is also one of the directors of the Federal Reserve of New York.
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DST
Super Contributor
$2 may not be as smart as it looks, in that the $17bn(i think) loss takes away a bit of market cap, and JPM must honor the debts. ING thought buying Barings for a pound was helluva sexy - until they spent a couple of years seeing what a crock of "value" it truly was. I spose the extent of the lifeboat ex FED is the decider.
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Wizard
Super Contributor
Ben doesn't have a life anymore! Feel sorry for his wife. Wait until the other banks report on Wednesday!
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Shaun_Siddall
Super Contributor
Fed's money only available end of the month. Bears needs funds ASAP, heard $15 is the going rate - i think the share is suspended so all the previously wealthy directors have lost most there wealth. Scary stuff...
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Tango
Super Contributor
This is the deal of the century for JPM -
"JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago"
and "JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds"
and "After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal" Brilliant move on the part of JPM, in my opinion
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Tango
Super Contributor
oop, I made a bold instead of break tag. Sorry!
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Werner_1
Super Contributor
I really think JPM well managed - i like Jamie Dimon's management style.
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Shaun_Siddall
Super Contributor
Flip $2 is the deal - that is incredible from $50 plus on Thursday...
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Tango
Super Contributor
yep, and from a high of something like $160 not so long ago
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john_1
Super Contributor
This is the first time a major on wall street has collapsed since the 1930's.
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Tango
Super Contributor
LTCM was considered 'too big to fail' and got bailed out some time in the nineties by the Fed and the rest of Wall st. Bear was the only major bank who did not partake in the bail-out of LTCM. I'll bet the rest of the banks are gloating at this failure and at how quickly the wheel turned for Bear.
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john_1
Super Contributor
Ita amazing that the brightest finacial minds on wall street are unable to avert a self inflicted crisis. Personally I am sitting here gloating, while they are losing billions I am making cash..
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SimonPB
Valued Contributor
ltcm trades actually netted a profit, but the liquidity crucnh couldn't met margin calls. Bears couldn't access the $200billion from ealier int he week as theya re not a bank, hence the fed laoned JPM who then use dthat money to help bears.
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SimonPB
Valued Contributor
tango, bears worth zip today, certainly nobody ever going to take them as counter party risk, so no more deals/trades. Also value mostly in IP/staff - and they are fleeing. Beras will do an Arthur Anderson on us and be gone one day soon enough.
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