What was the Feds role in the sale of Bear Stearns to JP Morgan?
The Fed extended JPMorgan Chase a $30 billion credit line to help it buy rival Bear Stearns, a firm with an 85-year history on Wall Street that was on the verge of collapsing due to losses in the mortgage market. JPMorgan is getting Bear Stearns for the rock-bottom price of about $2 a share — or about $236 million. That’s a stunningly low price when one considers that Bear Stearns’ shares were trading at $30 each on Friday, and that its company headquarters building in New York is valued at $1 billion by itself. Why did Bear Stearns agree to be purchased for such a fire-sale price? Bear Stearns really had no choice. The bank is facing an onslaught of rumors about its losses in the mortgage industry, and on Friday it reported some major liquidity problems — investors were pulling their money out and the bank was short on cash. The only way for Bear Stearns to keep doing business was to let itself be bought by another firm like JPMorgan. But the deal effectively wipes out most of Bear St
