Easter Monday 2008
According to the front page of the New York Times there is a new and improved deal for Bear Stearns shareholders. The terms of the proposed rescue package has been sweetened in order to win over major shareholders among Bear management. JP Morgan Chase will now pay $10 a share for the stock of the company which means that the head office building in New York previously valued at over $1 billion is now at least largely covered in the purchase price. As part of the new deal anticipating criticism that the Fed is bailing out wealthy stockholders at the expense of the little person JPMorgan will be responsible for the first one billion dollars of Bear Stearns bad paper. The Fed would be guaranteeing the next 29 billion. Whether this deal as it now stands will be approved and whether it will diminish or increase criticism of the deal from the general public's perspective remains to be seen. For at least some of the Bear stockholders it is a significant improvement.
Apparently an ill considered clause in the original deal agreement by which JP Morgan Chase was obliged to continue to guarantee 30 billion in Bear's bad paper even if they rejected the deal until either the deal was closed or the offer had run its course at an unclear time in the future was used or is still being used as leverage by Bear negotiators to up the bid price.As the bid price rises Fed and treasury unease will grow.
As to the value of their building with Wall Street in crisis mode and layoffs expected in the industry one would expect a decline in real estate values including the Bear Stearns hq for the short term at least. The problem of adequate regulation remains to be addressed asap
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