That's the real headline. The Bear Sterns takeunder at $2 is the moral hazard misdirection play. Secretary Paulson, when asked about the moral hazard of bailing out Wall Street replied, "You should ask a shareholder of Bear Stearns if they got bailed out."
JPMorgan added almost $13 billion in market cap today. Someone thinks someone got a good deal. So Dimon is smugly in the catbird seat, with the Fed's $30 billion backstop of Bear's suspected suspect paper. Until the deal closes that is.
So Bear shareholders just have to reject the offer.
If the Fed was so concerned about the contra-party exposure that the demise of Bear Stearns would cause the banking system, then the Fed and Treasury can get off the moral high horse, and offer Bear shareholders another billion or two so they'll agree to a deal. After all what's a couple billion amongst friends-especially when it's not your money? Bear shareholders have nothing to lose. JPMorgan has already guaranteed their book of business for the next twelve months. Now it's how much they're going to pay. And it ain't gonna be $2.
These guys don't even know how to cut a deal. Can you imagine a frat house having a party, and instead of having a couple of kegs, they had just a sixpack?
Last I checked, it's been a couple thousand years since the masses were fed on two fishes, and five loaves of bread. So who was the joker that thought Bear shareholders would exchange their shares for a Filet-of Fish?
We already knew that Treasury couldn't walk on water; did we have to find out that they can't even stand on ice?
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