Bear Stearns Sale a Real Pain for Employees

Sunday was no day of rest for the Board of Governors of the Federal Reserve System. A unanimous vote to "create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets" accompanied approval to decrease the discount rate by 25 basis points, to 3 1/4 percent. A third initiative was the approval of a deal for JPMorgan Chase & Co. (JPM) to buy The Bear Stearns Companies Inc. (BSC).

An announced acquisition price of $2 per share (or $236 million in aggregate) is an economic fall from grace by most counts. Bear common last closed at $30 and traded as high as $159 and change over the last year.

While good news for some, others are reeling from the precipitous drop in stock price. According to "Bear execs lack golden parachutes as stock plan crunched" (Reuters, March 17, 2008), journalist Joseph A. Giannone writes that executives will have little to celebrate since

Shares held by the top handful of executive officers plunged in value from about $1.8 billion 14 months ago to just $22 million today.

Employees are likely to fare no better, with 30 percent of company stock in their various benefit plans (profit sharing, options and so on).

Litigation is underway with Pittsburgh law firm, Stember Feinstein Doyle & Payne, LLC, announcing:

Possible illegal conduct relating to the Bear Stearns Companies Inc. Employee Stock Ownership Plan, Profit Sharing Plan and Deferred Compensation Plan.

According to the March 14, 2008 press release, the firm is investigating whether identified plan fiduciaries:

Knew or should have known that Bear Stearns was concealing its large exposure to highly risky Collateralized Debt Obligations, subprime mortgages, and other poor-quality securities, which has rendered Bear Stearns common stock and certain funds that it manages and offers as a risky investment for Plan participants.

Does anyone know if BearMeasurisk, LLC is likewise sold to JPMorgan? The BSC web page for institutional investors currently links to a description about this web-enabled product for pensions as follows:

Our plan sponsor offering addresses Corporate, Public and Taft Hartley Funds with defined benefit and defined contribution plans. We provide Value at Risk (VaR) analysis at all levels of your fund, including security level, asset class, country, account and total fund. We also provide marginal VaR (contribution of risk), Relative VaR (risk versus benchmark) and risk of the total fund as compared to a policy portfolio.

Comments

[WAKEUP]

Jail is the place for executives who ruin other people's lives.