So, it looks like Congress is going to want some answers to questions it has about the sweetheart deal, arranged by the Federal Reserve Board and the Treasury Department, wherein JP Morgan Chase was able to buy a rapidly collapsing Bear Stearns for some $236 million.
Though it will probably come to nothing in the end, and only after a great deal of the kind of posturing that only senators have perfected, it should be interesting to see how the Fed and Treasury choose to portray their actions as the scenario continues to unfold.
One change has already taken place as a result of Bear shareholders growling.
There are all kinds of bears–from teddy to polar–as we know. But what happened after the deal was announced was that the $2 per share price Morgan was to pay brought out the grizzly in Bear shareholders, large and small.
The $2 per share price was way too low, they growled, and they would be better off financially if Bear declared bankruptcy. In truth, when I first heard the $2 figure I thought it was a joke and that somehow I’d gotten sucked into a surreal game of Monopoly.
But no, it was for real. And not only did Morgan get Bear for 2 bucks a share, but it got the Fed to be liable for $30 billion of Bear’s most risky assets.
When Morgan’s CEO Jamie Dimon went to Bear’s headquarters he no doubt felt like he was going into Grendel’s lair. Great the growling grew and gruesome grievances did Jamie greet.
So what did he do? He renegotiated the deal, giving the Bear shareholders $10 per share. The Fed, placed in a corner by its own maneuverings, could hardly call off the deal without looking like it was a master puppeteer (which, of course, it was). So instead of Morgan getting a $30 billion cushion from the Fed, it is now liable for the first $1 billion with the Fed now standing behind (only!) $29 billion.