I think this is the result of the implied government guarantee that most investors believe is far stronger in Europe.
However, now that the global financial system is so strongly intertwined I don't think the world financial system could handle a default resulting in the liquidation of any bank on the list.
So does that mean all these banks' default insurance should be trading at government rates?
Bear Stearns' Easter Basket Written By: Deborah Evans 2008-03-25 12:01:00 It seems that the parties involved in JPMorgan’s (JPM - $46.44) takeover of Bear Stearns (BSC - $10.87) like to work on the deal on holidays, Sundays, and when the Moon is Void-of-Course.*
Following are the bear facts about the “amended” deal between JPM and BSC. If The Wall Street Journal timeline is
accurate, Bear’s Board of Directors couldn’t possibly have fully read the deal
before agreeing to it, since CNBC announced it was approved just after the market
opened this morning.
Photo:Mellie, Creative Commons, Flickr
Could It be JP Morgan Buying Bear Common? Written By: David Neubert 2008-03-19 11:16:32 Could it be a Holy Mystery, like they told you in Catholic school, for anything that couldn't be explained? Steve Randy Waldman at Interfluidity.com has another theory on why Bear Stearns (BSC - $5.94) is trading above the $2.00. He offers up god, oh I mean Jamie Dimon, channeling J.P. Morgan. Could The House of Morgan be the one buying shares above the deal price to vote them their own way? I love the idea but I see securities law problems with that theory. I don't think JP Morgan would risk that.
I'll be watching to see what Mr Waldman comes up with next.
Disclosure: I own BSC. I own Bear Stearn Preferred shares. I am short 10 strike calls on BSC and long 15 strike calls. I own JPM. I did not go to Catholic school.
Economist Jeffrey Sachs: "We'll Get Out of This Mess" Written By: Michelle Haimoff 2008-03-25 22:42:35 I attended Charlie Rose’s interview of Jeffrey Sachs at the 92nd Street Y on Tuesday night. Jeffrey Sachs, who is the Director of the Earth Institute at Columbia University and has been an economic advisor to governments in Latin America, Eastern Europe, the former Yugoslavia, the former Soviet Union, Asia, and Africa, as well as an author and the only academic to have been repeatedly ranked among the world's most influential people by Time magazine, is about as close to a household name as an economist can get.
Fed Makes a Gift to JPMorgan Written By: David Neubert 2008-03-17 14:13:09 I bought Bear Stearns (BSC - $4.68 - down 85%) on Friday for $33.00. I thought there would be some kind of rescue package. I was wrong. Here, Portfolio.com blogger, Felix Salmon summarizes some of my comments and those by others. Instead, what I got was The Fed exacting their revenge on Bear at my expense. I also benefited by the gift that the Fed gave to JPMorgan (JPM - $40.01 up 10%). Basically, what has happened is that the market (and I) didn't expect the government to play favorites and give such a valuable asset away at the shareholders' expense.
Did Bear Stearns deserve to go away? I don't doubt it. It would seem they didn't understand their own risks and didn't treat others nicely. As someone who competed against and interviewed a couple times at Bear Stearns over my career, I think I have a fairly common opinion of the firm. They were not very good citizens in Wall Street. For example, as a free rider they did not pitch in on the 1998 rescue of LTCM, though they did benefit. They culture at Bear Stearns was one of extreme self interest, which promoted chaos.
I know several employees at Bear who are wiped out. Stock vesting at Bear Stearns was cliff vesting over three years. This means that had to stay with the firm for three years to get your stock. Compensation at Bear (and most of Wall Street) is between 25%-65% in stock. So we are looking at a least a year's worth of earnings for many Bear Stearns employees being transferred to JP Morgan shareholders. I feel bad for these guys. They weren't expecting this. I know many others may not feel bad for this unlucky group. They are very employable and it's hard to get anyone to feel bad (except for the Bush administration) for millionaires getting pay cuts.
Photo:Photobunny, Creative Commons, Flickr
