Bearn Stearns: Crisis and 'Resuce' for a Major Provider of Mortgage-Related Products

摘要

In March 2008, Bear Stearns, the nation's fifth largest investment banking firm, was battered by what its officials described as a sudden liquidity squeeze related to its large exposure to devalued mortgage-backed securities. On March 14, the Federal Reserve System announced that it would provide Bear Stearns with an unprecedented short-term loan. This was rendered essentially moot when, on March 16, a major commercial bank, JP Morgan Chase, agreed to buy Bear Stearns in an exchange of stock shares for about 1.5% of its share price of a year earlier, a price that translated to $2/share. To help facilitate the deal, the Federal Reserve agreed to provide special financing in connection with the transaction for up to $30 billion of Bear Stearnss less liquid assets. During the weekend of March 22, in the wake of criticism from Bear shareholder and employees (employees own about one-third of the firms outstanding stock) over the $2/share price, Bear Stearns and JP Morgan renegotiated the terms of the deal: JP Morgan will purchase 95 million newly issued shares of Bears common stock at $10/share in a stock exchange. In response to the changed deal conditions, the Fed altered the terms of its financial involvement: it got JP Morgan to agree to absorb the first $1 billion in losses if the collateral provided by Bear for a loan proves to be worth less than Bear Stearns original claims. Instead of its original agreement to absorb up $30 billion, the Fed will now be responsible for up to $29 billion.