Stocks Jump On New Bear Stearns Bid

JPMorgan Chase Boosts Offer For Collapsed Investment Bank From $2 A Share To $10

(CBS/AP)  Wall Street extended its big advance Monday as investors applauded a new agreement that will give Bear Stearns Cos. shareholders five times the payout that was set in a JPMorgan Chase & Co. buyout deal a week ago. Investors were also pleased by a stronger-than-expected housing report, and sent the Dow Jones industrial average nearly 190 points.

JPMorgan boosted investors' optimism by lifting its offer for Bear Stearns to $10 per share from $2. The revised plan is aimed at soothing Bear Stearns shareholders upset over JPMorgan's earlier offer, which was made at the behest of the Federal Reserve when Bear Stearns was near collapse.

Shares in the investment bank jumped $3.42, or 57 percent, to $9.38, while JPMorgan rose 58 cents to $46.55.

Beyond the troubles of the financials, Wall Street was examining the housing sector - the root of much of investors' angst. A real estate trade group said sales of existing homes rose rather than declined in February, as had been expected.

The Fed's move and even the housing figures appeared to alleviate some of Wall Street's concerns about souring mortgage debt and lenders' resulting hesitance to grant loans of any sort. The latest Bear Stearns deal signals that investors' losses might not be as sizable as feared.

"The reason we've rallied the last three or four days is people are saying 'Hey, even if this paper is worth less than people think, the Fed is willing come in and buy it at some level,"' said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh.

The move was clearly aimed at diffusing a backlash among Bear Stearns shareholders who felt the original deal undervalued the 85-year-old institution. JPMorgan Chase Chief Executive Jamie Dimon spent most of the week trying to woo Bear Stearns employees, who collectively own about a third of the company.

A lot of people lost money, including Bear Stearns employees who were counting on stock for their retirement Bloomberg TV's Dierdre Bolton told CBS News' The Early Show.

"The Fed had a pretty unusual role in helping the two banks get together to begin with," says Bolton. "The idea was really supposed to be to stabilize the markets, but the Fed can't be seen using taxpayer money to bail out shareholders and has already drawn criticism on that account."

"We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise," Dimon said in a statement, "and bring more certainty for our respective shareholders, clients, and the marketplace."

The new deal values Bear Stearns at about $1.19 billion - still a fraction of what the company was worth before its sudden near-collapse earlier this month. It also includes a provision for JPMorgan to buy 95 million new Bear Stearns shares immediately, which gives it a 39.5 percent stake in the company before shareholders have even voted.

The amended offer was Dimon's attempt to ward off any competition, and quickly move on with the acquisition. The two sides also changed certain guarantees JPMorgan made related to Bear Stearns' positions.

The new agreement also calls for the Federal Reserve - which helped broker the emergency deal to save Bear Stearns from failure - to provide a $30 billion term loan with portfolio assets put up as collateral. Those assets will be held by a newly created company managed by BlackRock Inc.

If any part of the portfolio defaults, JPMorgan will be on the hook to cover the first $1 billion in losses. As the assets are paid off, the Fed will receive principal plus any gains.

The Fed said the action is being taken with the support of the Treasury Department to "bolster market liquidity and promote orderly market functioning."

Alan Schwartz, Bear Stearns' embattled president and chief executive, has been vilified within the company for the past week for selling out too low. The company's 14,000 shareholders - most of whom depended on Bear Stearns' stock as part of their retirement plans - are facing significant job cuts if the deal goes through.

He said the substantial share issuance to JPMorgan "was a necessary condition" to maintaining Bear Stearns' financial stability.

"Our board of directors believes that the amended terms provide both significantly greater value to our shareholders, many of whom are Bear Stearns employees, and enhanced coverage and certainty for our customers, counterparties, and lenders," he said in a statement.

Bear shares had been much higher than its deal price last week in anticipation of a new buyout agreement. The stock surged on Monday, rising $5.34 to $11.30 after the new agreement was unveiled.

JPMorgan shares also rose, adding $1.79, or 3.7 percent, to $47.76 in morning trading.

[Gary Kempf]

exCoachKen

I agree with you 100%

[excoachken]

Since my tax money helped bail this loser out of bankruptcy jail, I think the least that could be done to the top dog C.E.O.s who made these stupid decisions at B (ear) S (tearns), would be to take their "Golden Parachutes" away and let them make the hard landing that the rest of us do when we screwup in our job!

[Gary Kempf]

This is another example of what extent the current administration will go to insure the wealthy prevail, even through stupidity....

[apprxam]

Where the hell is Neil Bush? On the board of CitiGroup?

President says "don''t do anything too rash" regarding regulation. RepubliCons, with a straight face, claims that the lack of regulation had nothing to do with the subprime crisis and the Bear Sterns. Post-Enron, WorldCom, Tyco, et al. Sarbanes-Oxley enforcement watered down because highly paid CEOs, who claims that not many do what they do, insist that they are being held to account for the very company that pays them so well. High pay is fine, accountability isn''t.

Now! Angelo R. Mozilo, Chairman, former head of CountryWide, the company under federal investigation for the mess the economy is dealing with, is considering starting a new company to, you''ve guessed it, assist homeowners and mortgage companies navigate the troubling waters ahead. Talk about reinventing yourself.

[apprxam]

"MORAL HAZARD". Funny how we don''t see any of those "free market" Libertarians on Tv & Cable crying about government bailouts. But just a few weeks ago they were complaining en mass when there appeared any suggestions to help out mortgage holders. For months they used the ''moral hazard'' argument in protest of any assistance proferred for middle class Americans trying to save their homes. Even heard the principle of it not being illegal to take advantage of the "stupid".

The Fed handed over to JP Morgan Chase, the worlds 2nd largest criminal organization, Bear Sterns and guaranteed the bad portion of their holdings with public money. Now the rick kids are crying and the employee stockholders, who were apart of Sterns'' "cowboy", take-risk culture and even to the point of blocking a legitimate take-over bid by Sterns'' largest shareholder. The WTO and the EU should look into this because it''s obvious that the US authorities aren''t doing a dang thing.

Funny how Bankruptcy needed to be avoided to protect the market because Bear Sterns is too big, but the $2.00 a-share price only shook the market up for a day. Bush/Clintons looking out for the wealthy and not the common man has taken the shame out of begging by rich people by claiming the public good; just like repealing the estates tax and the trickle down theory.

[joyous88]

check out who owns most of the stock at bear/sterns

[joyous88]

republiCON propaganda, more bush lies;

stocks jump?

Yes they jumped, afterv the taxpayers of america bailed out some wealthy speculators that own most
of the stock in bear/sterns,

want to see something that will make you puke,

check out who owns 90 percent of these stocks

[marcosis78]

Exactly!

[mcv57]

The artificial economy has done it again. People still out of work, credit cards on overtime, and the CEO retirement plan remains the same.

I guess the real question at this point is can you afford to buy this boloney. If not, keep stashing your cash and precious metal . . . don''t be fooled.

[bobnjersey]

[ sure their up to it.......................anything for their close pals, the Democrats. ps While our President and the Federal Reserve have worked very hard the last week to stablize the markets the Democrats in our 110th Do-Nothing Congress have been on vacation.]
[Posted by perceptions5 at 05:29 PM : Mar 24, 2008]

yes ... bush worked hard to help out his close friends ... those poor investment bankers. he''s gotten pretty good at spending money that doesn''t really exist.

[hypnotoad72]

I wish America would be so lucky; investors are thinking that going international will benefit in the short AND long terms...

[perceptions5]

Wow this is really bad news for Democrats and their close pals in our mostly liberal MSM wolfpack press.

Maybe our liberal MSM wolfpack press needs to "ramp up" their scaring of the American people with fear and instablity "stories".

I sure their up to it.......................anything for their close pals, the Democrats.

ps While our President and the Federal Reserve have worked very hard the last week to stablize the markets the Democrats in our 110th Do-Nothing Congress have been on vacation.

They plan on coming back on April 1st ..................April fools day..........which in this case surely fits like a glove.

[generey]

Stocks Jump On New Bear Stearns Bid.

That''s too bad. I noticed the price of gas did too.

[jsutaguy]

Ummm, besides agreeing with all the posters here who point out the ways in which laws are being broken, and common people are being shafted by this ''deal'', I''d like to remind the readers that the Bear ''buyout'' package from JPMorgan includes over 1 Billion dollars IN SEVERANCE PAYMENTS FOR TOP EXECS AT BEAR STEARNS!

How long will the common man tolerate and accept this completely unmanaged greed which has been sapping companies of their worth, their humanity, and their value as entities operating in AMerica?

I need to remind the readers that the CEO of Merrill Lynch, upon being forced out over HIS role in creating and facilitating this subprime fraud, received over 150 million dollars in severance when he was ''fired''.

The CEO of CitiGroup received over 30 million dollars when he was ''fired''.

How long, people? Congress doing noting about it. No laws enacted (or even proposed) to prevent it. Not a whisper of activity to prevent the few from living lives of unimaginable opulence at the expense of the destruction of common American families, dreams, and now homes.

How long?

[forthepeopl1]

"The Fed had a pretty unusual role in helping the two banks get together to begin with," says Bolton. "The idea was really supposed to be to stabilize the markets, but the Fed can''''''''t be seen using taxpayer money to bail out shareholders and has already drawn criticism on that account." THIS AFTER WE THE PEOPLE HAVE GIVEN THEM OVER 1 TRILLION IN LOANS..THIS WOULD OF PAYED OFF ALL THE MORTGAGE MESS..AND NONE WOULD BE ON THE STREETS
TO EVERYONE,

WE THE PEOPLE DO HAVE THE RIGHT TO SHUT THIS GOVERNMENT DOWN. AND THEIR IS A WAY TO MAKE OUR GOVERNEMNT STOP IN THIER TRACKS..

THE GREAT AMERICAN WALK OUT..THATS RIGHT FOR 3 OR 4 DAYS LIKE A THURSDAY THRU MONDAY..EVERY AMERICAN IN THIS COUNTRY DO NOTHING...I MEAN NOTHING BUT STAY HOME AND ENJOY THE FAMILY. ALL TRUCK,TRAIN,PLAINS,EVERYONE CAN AFFORD TO TAKE A FEW SICK DAYS FOR THIS..

IN ONLY A FEW DAYS OF NOTHING MOVEING IN THIS COUNTRY WOULD TELL CONGRESS AND THE WHITEHOUSE WHO REALLY RUNS THIS COUNTRY..THATS US AMERICANS... SO WHEN WOULD BE A GOOD DAY TO START THIS..

AND I MEAN IT DONT BUY ANYTHING....DO ANYTHING...DONT GO ANYWERE TO SPEND A DIME...

IT WOULD PUT THIS COUNTRY ON ITS KNEES..LIKE WE SHOULD

the great american STIKE.................

[e-mail]

[oilfix]

Here''s an unsanitized version:
"It%u2019s getting funnier by the minute. Not only do disgruntled shareholders%u2019 voices get louder, there are now accusations of the Fed/Bear/JPMorgan deal being downright illegal.
JPMorgan has started to revise the deal and offer 5 times more than last Monday, Bear tries to sell 39.5% of itself to JPM (no shareholder approval is required below 40%), and The Fed wants to keep the deal as is. Investors and gamblers alike decide they can make a buck or two out of this cesspool, so futures were soaring through the night, and in early trading.
There is a new deal.
They seem to have focused on diluting the voices of angry shareholders. Issue 95 million new Bear Stearns shares, and sell them to yourself and your friends, who''ll vote with you; that should work."
The US markets are making big gains today, not of any good economic news, there hasn''t been any for several weeks, but because this shows laws will be broken/circumvented to maintain the status quo. Oh, and the beleif many of the failing sercurities will be shifted to the taxpayer.

[forthepeopl1]

"The Fed had a pretty unusual role in helping the two banks get together to begin with," says Bolton. "The idea was really supposed to be to stabilize the markets, but the Fed can''t be seen using taxpayer money to bail out shareholders and has already drawn criticism on that account."
TO EVERYONE,

WE THE PEOPLE DO HAVE THE RIGHT TO SHUT THIS GOVERNMENT DOWN. AND THEIR IS A WAY TO MAKE OUR GOVERNEMNT STOP IN THIER TRACKS..

THE GREAT AMERICAN WALK OUT..THATS RIGHT FOR 3 OR 4 DAYS LIKE A THURSDAY THRU MONDAY..EVERY AMERICAN IN THIS COUNTRY DO NOTHING...I MEAN NOTHING BUT STAY HOME AND ENJOY THE FAMILY. ALL TRUCK,TRAIN,PLAINS,EVERYONE CAN AFFORD TO TAKE A FEW SICK DAYS FOR THIS..

IN ONLY A FEW DAYS OF NOTHING MOVEING IN THIS COUNTRY WOULD TELL CONGRESS AND THE WHITEHOUSE WHO REALLY RUNS THIS COUNTRY..THATS US AMERICANS... SO WHEN WOULD BE A GOOD DAY TO START THIS..

AND I MEAN IT DONT BUY ANYTHING....DO ANYTHING...DONT GO ANYWERE TO SPEND A DIME...

IT WOULD PUT THIS COUNTRY ON ITS KNEES..LIKE WE SHOULD

the great american STIKE.................

[e-mail]

[forthepeopl1]

LOKK WHAT YOUR TAX DOLLARS IS DOING FOR THE RICH..

GREAT JOB AMERICANS

[shanev137]

Republican government welfare for the rich.

[timdgrim]

Well as long as everything is good with the stock market...then everythings HUNKY DORY....Wooooooo Money...MONEY!!!! Come on taxpayers..give us some more....MONEY!!!MONEY!!! Watch our stock go UP!!!!
WOOOOOOOO! Thanks FED!! WE''LL BE BACK FOR MORE!!!!