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Bear is Saved for JP Morgan to be Saved

Fed saved Bear Stearns by guaranteeing 29 billion of their bad paper in order for JP Morgan to be saved since Bear going down would have in effect allowed JP Morgan to fail due to the credit swaps problem which JP Morgan was holding lots of Bear's swaps. So essentially The Fed bailed out JP Morgan via the Bear guarantees. If there wasnt any liability to JP Morgan if Bear has gone out; then they would have let Bear Stearns file for Bankruptcy and that would be that. The increased offer by JP Morgan to the stockholders is a token of JP Morgan's own appreciation for allowing this deal to go through. The Bear stockholders know JP Morgan is not going to flinch over $10 per share since the damage to JP Morgan if the Bear deal falls apart is exponentially much greater than any sweetened offer. The Fed and JP Morgan knew the $2 original share offer was their initial low ball deal and were expecting to have to sweeten the offer.It will be interesting to see if this latest offer is good enough for the shareholders since the shareholders know both the Fed and JP Morgan cant afford for the deal to fail. What is the highest price JP Morgan will have to pay per share?

Who knows where the next problem is and what the ramifications are for other banks but to think the very same people who created the problem are now going to be part of any long term solution is delusional. The very fact that no one has proposed investigating why this over all financial debacle happened and who caused it should give everyone pause. Of course they have already started proposing 'solutions and possible regulations' without any due diligence by a totally independent commission, to the reasons why the whole mess happened.

The Fed, banks, financial entities etc. are hoping to delay the damage with the wish there be no transparency and enough time for the assets to gain value and make the balance sheets healthy.

What I cant understand is how come shareholders and district attorneys around the country arent suing civilly and indicting them all for fraud, respectively. It would seem easy to indict for fraud and many other criminal charges when Bear and other companies' executives make public statements their businesses are fine only days before they are bailed out by the Fed or declare bankruptcy.  Or when executives take huge bonuses knowing full well their companies' balance sheet problems will be public knowledge in a short period of time is also fraudulent.

Anotherwards many people should be going to jail or be forced into bankruptcy just defending themselves.

by An American in London on Mon Mar 24th, 2008 at 01:47:09 PM EST

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