So it would seem
I watched Cramer’s take on this last night for a good laugh. But he isn’t too far off from everything I can gather about the deal
CFA_Halifax Wrote: ------------------------------------------------------- > I watched Cramer’s take on this last night for a > good laugh. But he isn’t too far off from > everything I can gather about the deal Was there any crow involved? I saw a replay on “The Daily Show” last night of some rant he made in responding to a viewers email last week. He told them that the last thing they should do is pull their money or sell Bear Stearns.
I think the frightening thing here is that the Fed had to agree to take the first $30bn in losses from Bear Stearn’s bad mortgage assets… the equity purchase price is meaningless, the Fed bailed them out, they had to basically give JPM a nearly free option by taking on a massive first loss position. I think that it indicates that things at Bear are WAY WORSE than anyone expected. From a Fed perspective they needed someone to manage the positions and take over the business, they can’t manage the operations of a bank that large, they simply dont have the systems in place, and so they basically had to pay JPM to do it for them. The idea that the equity holders are upset here is kind of ridiculous since it is clear that any value to any buyer would be predicated on a government supported bailout of Bear’s awful mortgage book. The equity is worth $0 here, they just decided to throw investors a bone