I was looking at this Comptroller report on banks and leverage and JPM was #1 with over 71 Trillion in derivatives. The theory came out that maybe a reason for JPM to purchase BSC is because Bear is probably on the other end of a lot of these contracts. JPM can buy the company, match the contracts, and eliminate the positions entirely with no value change. So if you could eliminate a ton of your nasty derivative positions to the tune of $236mil, doesn’t that make you a pretty sly cat? Does anyone else think this is a viable reason for the purchase?
Don’t know a great deal about either JPM / BS, but I was wondering if it would be used as cover for a cheeky rights issue to “support BSC’s balance sheet.”
Interesting? Anyone monitoring credit default swap spreads in JPM? Willy
I don’t have that, but I know their total swaps were 61.5trillion…thats trillion with a T folks.
So does it mean - JPMC had loads of derivatives contracts with BSC as the counterparty and now since they are a single institution, make use of internal crossing trade matching and zero-out those deals??? All this added to the $1.4 bn Manhattan headquarters… well, this surely could be classified as the ‘Thanks Giving’ deal of the year for JPMC.
Dinesh-thats what I was thinking anyway, as far as zero-ing out the deals. Pretty smooth if that was part of the strategy…and yeah a nice newer building in Manhattan is some nice icing on the cake. I dont know if it is 100% true as BSC doesnt have the swaps and stuff listed as it is not a bank or trust co, but it is at least plausible.
what if a bunch of their positions are now unhedged since they are effectively their own counterparty?
Hmmmm…interesting.
Yup. Can’t remember where I read that but JPM has a lot of swaps with BSC and it was one of the reasons why JPM wanted to buy BSC. As I think about it more, now they can cancel those swaps (less exposure) and issue similar ones with different institutions and coin some more money (assuming there’s an active swaps market). Pretty smart IMO. And get a piece of prexisting prime real estate in the entire deal.