chanakya

More Questions Than Answers on Bear

Equity owners have to bear the risk of an inefficient operation.. Obviously JPM knows more than it can reveal at this stage given the implications it will have on the broader market and some gentle cajoilng from the Fed. But as the vote comes nearer, you can expect tit bits on how bad the situation was and why a prolonged bankruptcy will not help the shareholders. It must have been quite a dilemma for the Fed on how to intervene in the situation, but the key factors would have been a (i)strong credit standing for the acquirer--they wd have to rule out a situation where the acquirer could not digest BS(ii) an indication that while the Fed will provide a line of credit, equity owners will ultimately pay(iii) err on the side of orderly transition even though it might disadvantage a few in the short term
Actually, the Fed may make some gains in the process.. who knows!
All in all a very decisive action indeed..these are learning times for policy formulators across the world.. learn while you drive