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Investment bank JPMorgan Chase just bought fellow investment bank Bear Stearns for $2 per share. That's right$2 per share. To give you an idea how ridiculous that is; Bear Stearns traded for $171 per share on January 12, 2007. What cost JPMorgan a total of $236 million today would have cost them $20.1 billion (that's billion with a B) last year. Now THAT is a discount...
Of course JPMorgan's buying a hornet's nest of problems...or is it? The Federal Reserve has basically said it plans to take control of $30 billion of Bear's troubled mortgage backed securities. How much more could there be? On that point, I'm not sure. Please enlighten me if you are...
Also the Fed lowered inter-bank rates on Sunday by another quarter point and announced the formation of a new type of credit facility to help banks get short-term funding. JPMorgan also has an extensive commercial bank and asset management arm against which it can borrow in order to smooth out whatever problems it is inheriting with Bear.
Sounds like an all-around win for JPMorgan and its CEO Jamie Dimon, Wall Street's own Boy Wonder. If there's any downside for them at this point, I can't see it.
The downside is for the U.S. taxpayer, who eventually has to pay the bill for all of these government bail-outs. Meanwhile President Bush is saying we should "go slow" in bailing out U.S. homeowners who are having trouble paying their mortgages.. Right. We should only bail out multi-billion dollar corporations, not the people who are getting the most squeezed by all this. See below, from the New York Times...
"...Friday President George W. Bush talked about going slow in helping the millions of struggling American homeowners stating that 'we got to be careful and mindful that any time the government intervenes in the market, it must do so with clear purpose and great care.'"
Ironically, the reason Bear Stearns failed is precisely because the U.S. homeowner is in such bad shape. So, in reality, the defaulting homeowner ends up paying twice; in the form of a lost house and bad credit, and increased taxes down the road. Maybe they spent beyond their means, maybe they were forced into a bad mortgage product, or maybe they just can't keep up anymore.
Either way, the only people who truly deserve to be irate are those who've kept out of this whole mess by being financially responsible, because they're still going to have to endure the taxes, the inflation, the sluggish growth, etc. But, then, those are the people who'll be able to weather whatever storm is coming, anyway.
Maybe that's why JPMorgan gets to come out of this whole thing smelling like a rose; because it played the game smart throughout, and when the time came to capitalize on a tremendous opportunity, it was ready.
As Lou Manhiem (Hal Holbrook) says in Wall Street [paraphrase]: "Quick buck artists come and go with every Bull Market, but the real players know how to survive the Bear Market..."
Of course JPMorgan's buying a hornet's nest of problems...or is it? The Federal Reserve has basically said it plans to take control of $30 billion of Bear's troubled mortgage backed securities. How much more could there be? On that point, I'm not sure. Please enlighten me if you are...
Also the Fed lowered inter-bank rates on Sunday by another quarter point and announced the formation of a new type of credit facility to help banks get short-term funding. JPMorgan also has an extensive commercial bank and asset management arm against which it can borrow in order to smooth out whatever problems it is inheriting with Bear.
Sounds like an all-around win for JPMorgan and its CEO Jamie Dimon, Wall Street's own Boy Wonder. If there's any downside for them at this point, I can't see it.
The downside is for the U.S. taxpayer, who eventually has to pay the bill for all of these government bail-outs. Meanwhile President Bush is saying we should "go slow" in bailing out U.S. homeowners who are having trouble paying their mortgages.. Right. We should only bail out multi-billion dollar corporations, not the people who are getting the most squeezed by all this. See below, from the New York Times...
"...Friday President George W. Bush talked about going slow in helping the millions of struggling American homeowners stating that 'we got to be careful and mindful that any time the government intervenes in the market, it must do so with clear purpose and great care.'"
Ironically, the reason Bear Stearns failed is precisely because the U.S. homeowner is in such bad shape. So, in reality, the defaulting homeowner ends up paying twice; in the form of a lost house and bad credit, and increased taxes down the road. Maybe they spent beyond their means, maybe they were forced into a bad mortgage product, or maybe they just can't keep up anymore.
Either way, the only people who truly deserve to be irate are those who've kept out of this whole mess by being financially responsible, because they're still going to have to endure the taxes, the inflation, the sluggish growth, etc. But, then, those are the people who'll be able to weather whatever storm is coming, anyway.
Maybe that's why JPMorgan gets to come out of this whole thing smelling like a rose; because it played the game smart throughout, and when the time came to capitalize on a tremendous opportunity, it was ready.
As Lou Manhiem (Hal Holbrook) says in Wall Street [paraphrase]: "Quick buck artists come and go with every Bull Market, but the real players know how to survive the Bear Market..."
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