Samson has been shorn of his locks and blinded.
JP Morgan (NYSE: JPM), it appears, will raise its bid for Bear Stearns (NYSE: BSC) from $2 a share to $10. It is not necessary and it is hard to imagine why the bank’s shareholders would support it.
According to The New York Times"The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal." But, fight with what? No alternate offer for Bear Stearns has come up. The brokerage is too deep in the mud. Too many of its customers have taken out money. It is only JP Morgan, with $30 billion in cash from the Fed, which was in a position to do a deal. If the Fed withdraws its money, Bear Stearns will almost certainly fail the same day.
The Fed actually asked JP Morgan to spend no more than $2 a share for Bear Stearns. The central bank is frugal where the money center bank may not be, if it raises its offer.
JP Morgan may be concerned that Bear shareholders will try to block the deal because it was the equivalent of a train robbery. But, that is not true. It is Bear’s management, especially the lame former CEO James Cayne, who let his company take huge risks in the hopes of huge rewards, When these did not work out, Cayne could not hold the firm together. It is telling that his board kicked him out as CEO. The governing body at Bear knows what the Fed does. It is not JP Morgan’s fault that the brokerage is going for $2. It is not the Fed’s. Bear Stearns dug its own grave and it is time for it to walk into the hole.
Douglas A. McIntyre
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