JP Morgan & NY Fed Try to Rescue Bear Stearns (BSC, JPM)

Bear Stearns Co. (NYSE: BSC) is getting a temporary reprieve this morning.  JPMorgan Chase (NYSE: JPM) and the New York Fed have provided liquidity financing for 28 days to the struggling brokerage firm.  This will allow Bear Stearns funding as needed.

There has been a run on the bank over at Bear Stearns over counterparty risk concerns and over its liquidity concerns.  Part of the announcement also notes that Bear Stearns is also talking with JPMorgan Chase & Co. regarding permanent financing or other alternatives, although no assurances can be made.

Bear Stearns has been getting a liquidity crunch over the last week that culminated over the last 24 hours.  This is a bailout for all practical purposes.  If you want to know what the brink of disaster looks like at a major financial institution, this is it.

Bear Stearns closed at $57.00 yesterday.  The initial reaction looked like this was going to open up 5% to 10%, but now shares are down around $54.00 or $53.00 in early indications.

Jon C. Ogg
March 14, 2008