JPMorgan's Actions Indicate Bear Was a Bargain

In Thursday's testimony in front of the Senate Banking Committee, investors got a behind the scenes glimpse of what really happened over St. Patrick's Day weekend when Jamie Dimon and JP Morgan (JPM) had the "luck of the Irish" on their side and acquired Bear Stearns (BSC) for $2 per share.

In his own words, Dimon told Senators that JP Morgan took on considerable risk in acquiring Bear Stearns, and that without the lending facility that was put in place, JP Morgan "could not and would not have assumed the substantial risks of acquiring Bear Stearns." He added that the Fed's facility was not a way for JP Morgan to dump the bad assets on to the Fed when he testified that, "We kept the riskier and more-complex securities in the Bear Stearns portfolio for our own account. We did not cherry-pick the assets in the collateral pool."

Finally, Dimon maintained that if JP Morgan had not stepped in to rescue Bear Stearns, the consequences would have been 'disastrous', and not just for Wall Street. The effects would have been felt by "...people all over America -- union members, retirees, small-business owners, and our parents and children..."

While it's easy to look back now and say that JP Morgan had the steal of the century, hindsight is always twenty-twenty. No one really knows how stressful things were behind the scenes. That being said though, judging by the company's recent actions, it appears as though JP Morgan knows what a great deal it got. One week after announcing its deal with Bear Stearns, JP Morgan announced on March 24th that it would increase its bid by 400% to $10 per share.

Tonight, we got even more information as to how badly JP Morgan wants this deal to get done. In a filing after the close on Thursday, JP Morgan disclosed that it purchased 11 million shares of BSC stock at a price of $12.24 per share in the open market just minutes after agreeing to buy the company for $10 per share. Additionally, they also stated that they plan to keep buying shares on the open market until they acquire 49.5% of the company. They always say actions speak louder than words, and based on these actions, one would have to assume that JP Morgan thinks the benefits of acquiring Bear Stearns even at the $12 level are well worth the risk.

Comments

[Karl Zachar:]

At yesterday’s testimony in front of the Senate Banking Committee, Bob Steel (Treasury Under Secretary) said that his boss (Treasury Secretary Hank Paulson) set it up for JP Morgan to buy Bear Stearns at the low ball price of $2 per share. (Just one week prior Bear’s stock was trading at $70.)

It is now clear that the $2 stock price offer (which was orchestrated by Paulson and Bernanke) would justify the government’s highly criticized $30bn bailout of Bear. (“We had to bail out Bear. It was a sinking ship. Look, it was only worth $2 per share.”)

Bear had to accept any offer that was given to it. It was desperate. They were in no position to negotiate price. The Fed and Treasury handpicked JP Morgan and told them: “if you buy Bear Stearns and save our collective political asses, we will “give” Bear to you for $2 per share.”

Remember, Bear’s stock price traded at $70 one week prior to this and $170 12 months ago. So the Fed and Treasury screwed Bear’s employees and shareholders by giving away the company for $2 per share. Why did they do this? To save their political futures – that’s why.

At the end of the day, even JP Morgan could not get away with this crime. So they eventually bought Bear for $10 per share. Still pretty damn cheap.

Bob Steel had better watch out. His old Goldman buddy Hank might be in trouble - big trouble. The Democrats have a huge incentive to go after Hank for his blatant cronyism. Hank threw Bear shareholders under the bus to temporarily save is butt. He might just throw Steel under the bus next.

Moral hazard my foot. Physical hazard is more like it. Heads are going to roll for this circus act.

2008 Apr 04 05:33 PM

[BAC long te...:]

I glad you think it such a steal! The JPM stock has fallen after the testimony. It reach a high of $47 and change and now it is at $45 and change. I don't know if it is because of arbitrage or what! But it not going up and the percentage of short sellers is also up.

I just wonder if JPM made a good purchase after all; since the stock price doe not reflect this at all!

Does anyone know why this stock did not go up when JPM finally got 49.4% of the Bear Stern shares or is the market waiting for it to close and then JPM will be in the upswing?

Thanks.

2008 Apr 04 10:19 PM

[Balance She...:]

What do you think the odds are of this actually going through when 49.4% of the shares are owned by JPM, with the remaining 50.6% owned by not-JPM? Oh yeah! Plus you have to add in the other side of all the short sellers out there (to long buyers), meaning that there is a whole lot more than 50.6% of votes that are not-JPM. Now what do you think the odds are of this actually going through? Not to mention all the legal challenges that likely await. p.s. How will the shorts buy to cover when so many shares are now held by people who aren't selling because they have such a strong incentive to vote (JPM & BSC bondholders for/BSC sharholders against) this deal? Have you noticed the lack of volume on BSC lately? What turmoil will their inability to cover cause in the next few weeks? Can someone say "delisitng". Is this why BSC hasn't filed yet? The Fed has played this brilliantly. It should be fun watch it play out!

2008 Apr 06 12:48 AM

[the plaintiff:]

dear sir;

all yoour articles on bear stern is full of inaccuracies. jp morgan is acting in orders of the us treasury and the feds, bcause the llc of delware is requiring them do it or face the music in contempt of a us federal court out of court settlment of 2004.
jp morgan, and black rock the new adovcate for the llc of delware
was required, because the llc request5ed the sec, congress and the feds with the trustee sec of home land security to approve trillions and mead trillions in released of assest from its account at the us treasury.
WHAT SHOULD HAVE BEEN MADE PUBLIC TO THE CEO OF STERANS IS THAT THIS A 180 LIMIT ON TIME THE LLC HAS TO HLD THESE ASSESTS BEFORE THE CONTROL GOES BACK TO STEARNS.
YOU SEE THE LLC IS USING THIS AS A TAX WRITE OFF AS ARE THE TRILLIONS HAVE BEEN USED TO SAVE THE ECONOMY.

IF IRAN WANTS TO TALK BS, HERE IS A FACT THE 20 TRILLION THE LLC AUTHORIZED TO BUY US DOLLARS WAS RAISED TO 28 TRILLION.
IT COULD GO TO 100 TRILLION BY FRIDAY.

YOU SEE IRAN AND OPEC JUST DO NOT GET IT, THERE IS A NEW SHERIFF IN TOWN WITH ASSEST TO BURN AS A TAX WRITE OFF.

THE NATIONAL DEBT IS GONE--THE LLC OUT OF DELWARE JUST BOUGHT THE DEBT AT 10 TRILLION AND MARKED PAID IN FULL. THIS WAS MADE KNWO TO THE SENATE AND ALL.

WERE DO YOU THINK ALL THIS ONEY WAS COMING FROM SANTA CLAUS?

HOW DID YOU LIKE THE RESCUE OF THE BOND AND UNDERWRITERS, ETC.. THE BUY IN GOLD, SILVER, COOMODITES, THE 3.5 TRILLION IN THE MUTUAL FUNDS, TRILLIONS INVESTED INTO BANKS, THE INVESTMENT INOT NORTHWEST, ALOHOA OR IT OUTBUYING IT OUT, THE BUY OUY OF TRUMP ENTERTAINMENT AND ALL ITS CASINO'S OR AS AN INVESTOR WITH 100 BILLION TO INVEST. LOOK FOR THAT DEAL TO GET IMMEDIATE APPROVAL FROM THE SEC.

IN FACT THE LLC REQUESTS AVERAGE 47 OR MORE PAGES WITH ADDITONAL 37 PAGES FOR QUARTERLY DISBURSE MENT TO MEMBERS AND CHARITIES.

WOULD YOU KNOW IT COST NOTHING TO BE A MEMBER, JUST BE NSNE ENOUGH TO TAKE THE HEAT THAT GOES WITH STANDING UP TO GREED AND CORRUPTION.

DID THE MDA (JERRY'S KIDS ENJOY THE 500 BILLION DOLLARS THEY GOT IN A GIFT THIS YEAR.
YES ,HILLARY WAS CORRECT THE HEAD NUT OF THIS LLC OUT OF
DELWARE AND REGISTERED IN MISSOURI IS PROUD OF IT.
HE IS A EOD TECH FROM THE US ARMY R&D. HIS RANK WAS A E-6
SSGT AND 13 YEARS ACTIVE AND HAS A MEAN STREAK 1OO YARDS LONG.
IT WAS HIM AND HIS CALSS MATE , A GENERAL IN AFGANISTAN ON THEIR CRIMINAL JUSTICE COURSE THAT WAS THE HIT OF THE HEARING BEFORE US SENATOR BIDEN LAST MONTH.
THIS NUT WAS ALSO THE TALK BEFORE US SENATOR DODDS AS WELL AS IT RELATES TO WALL STREET AND THE FEDS/ US TREASURY.
THE HEAD OF THIS LLC DOES NOT LIKE TO HAVE HIS NAME OR THE FULL NAME EVDS & JRD, LLC MADE PUBLIC KNOWLEDGE.
I HOPE WESLEY SNIPES BEHAVES HIMSELF AND HIS FRIENDS SO THE THE IRS WILL BEHAVE THEMSELVES AS WELL.
THERE MUCH MORE TO TALK ABOUT. EMAIL IRMA 20042004 FROM DETAILS.

THE PLAINITIFF

2008 Apr 07 12:52 AM