In a shocking deal reached on Sunday to save Bear Stearns, JPMorgan Chase agreed to pay a mere $2 a share to buy all of Bear — less than one-tenth the firm’s market price on Friday.
The cut-price deal for Bear Stearns reflects deep misgivings about its future and the enormous obligations that JPMorgan is assuming in guaranteeing the firm’s obligations. In an unusual move, the Fed will provide financing for the transaction, including support for as much as $30 billion of Bear Stearns’s “less-liquid assets.”
Some things can leave you speechless. The Fed is helping finance a firesale and helping guarantee the debts. When over-extended home owners began losing houses there was a lot of pooh poohing of their straits, essentially their bad judgment should cost them. They did use bad judgment or were defrauded, the historical appreciation of housing was there for anybody to look at and it did nothing to uphold the numbers that were being used. Oddly enough, the same data in more detail was available to folks like Bear Stearns.
The issue is that Bear Stearns is too large as a singe entity to allow it to fail. The rest of you in the same boat are not important enough as individuals to merit the same 'assistance.' Now that does ignore that your individual problems are what sunk people like Bear Stearns. It does ignore that prompt action to shore you up might have avoided this disaster and possibly cost less. That would, of course, be unfair to those of us who didn't buy into the market balloon.
Maybe right now isn't a real good time to make a 'fairness' argument. Maybe right now would be a real good time to understand the difference between plutocrats and you. Maybe right now would be an excellent time to be named JP Morgan Chase. Or maybe better yet, Bear Stearns CEO James Cayne who took home $232 million '93-'06 and will make $13.4 million on this deal. Oh yeah, George II just got done telling us the economy is basically sound - for some of us, he didn't add.