JP Morgan Snaps Up Bear Stearns for $2 a Share
JP Morgan Chase will acquire the troubled investment bank Bear Stearns at the fire-sale price of $2 a share, a deal quickly approved over the weekend by the Federal Reserve, which aims to keep the financial giant from collapsing from its losses in the subprime mortgage crisis.
The approval came as the Fed also took the extraordinary step Sunday of lowering its emergency lending rate to financial institutions by a quarter-point to 3.25 percent.
The moves, days before the Feds scheduled meeting Tuesday, smacked of desperation to many investors, stirring fear worldwide that other banks with sizable exposure to troubled credit markets could also implode. Stocks fell sharply in Asia and Europe, and oil prices set fresh records in Asian trading.
Stunned dealers and traders at Bear Stearns turned up for work Monday to find the value of their stock options in tatters and the future of their jobs up in the air. Just last year, Bear Stearns stock was trading at $172 a share, although it had plunged to $30 in recent days amid market rumors that the bank was heavily exposed to subprime losses.
JP Morgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide, or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression and a slew of recessions.
JP Morgan said it will guarantee all business — such as trading and investment banking — until Bear Stearns' shareholders approve the deal, expected to be completed during the second quarter. The acquisition includes Bear Stearns' midtown Manhattan headquarters.
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