$68 to $2….out of the blue…..in five sessions….for the world’s 5th largest investment bank.
Today, Bear Stearns is no more, sold for a measly $236.2 million to JP Morgan at the behest of the Fed.
So after an 85-year history, in which it survived the Great Depression, two World Wars, and a string of other financial crises, it was the housing bubble that finally sent Bear Stearns down the memory hole forever.
But here’s the thing, the housing market isn’t anywhere near close to bottom yet so the Bear Stearns debacle of the last five sessions is only just the first of many.
The dominoes are falling fast now. And where they stop is anybody’s guess.
Here’s the skinny on what looks to be like the beginning of a greater unwinding.
Bye-bye Bear.
From AP by Joe Bel Bruno and Madlen Read entitled: JPMorgan to Buy Bear for $2 a Share
“Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million.
The stunning last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system sparked by the collapse in the subprime mortgage market. Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market’s collapse.
The Federal Reserve and the U.S. government swiftly approved the all-stock buyout, showing the urgency of completing the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation’s fifth-largest investment bank into trouble.
“This is going to go down in very historic terms,” said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. ‘This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we’re probably heading into a recession.'”
But don’t worry; the President did come on this morning to assure us all that everything was just fine. Hank Paulson told him so.
So there’s nothing to see here folks….just move along.
Yeah right. Bear Stearns isn’t exactly e-Toys.
Here, by the way, is the perfect picture of misery.
Bear went from $84.00 in book value to $2 in a fire sale. Ouch.
Now if that doesn’t open your eyes I don’t know what will.
