fluffygrrl

On March 16, 2008, JP Morgan Chase Bank announced plans to purchase the troubled organization for approximately $2 per share or approximately $240 million. The exact terms of the transaction are JPMorgan Chase will exchange 0.05473 shares of its stock for each share of Bear Stearns. To illustrate the severity of Bear's financial condition, the sale price is only 2.4% of the bank's book value and only 1% of its market value only 16 days prior to the sale. The real estate value of the bank's Manhattan headquarters alone is about $1.2 billion. This implies that some of Bear's businesses are worthless or generate outsized losses.

Additionally, in a rare move, the Federal Reserve agreed to fund up to $30 billion of Bear's less liquid assets. It is thought that there will be mass layoffs at Bear Stearns entities. The transaction is a fast-track deal, that has already received the approval of both boards. JPMorgan is expected to close its purchase by the end of June 2008, pending shareholder approval.

This action by JPMorgan Chase further underscores the magnitude and severity of the credit crisis in the United States. David Goldman, former head of debt research at Bank of America, stated that "for Bear's stock price to go to effectively zero, contrary to market expectations, tells us that something is systemically very wrong and we're at a very dangerous moment."

This is the LAST bank the Fed can afford to save. If your money is still in the system tomorrow, it stays there. Forever.