Sunday, May 25, 2008

Bear Stearns again

Why didn't Bear Stearns sell itself earlier? Apparently because Bear Stearns knew the extent and the depth of the problems in it's mortgage book. Two weeks and two executives from Bear now "leave" JPMorgan. From FT:

The departure of Jeff Mayer and Craig Overlander comes amid questions about the value of the Bear Stearns mortgage book. The two men had been in charge of the fixed income department at Bear Stearns and were named vice-chairmen of JPMorgan’s investment bank soon after it agreed to buy Bear Stearns in mid-March. The promotion of the pair was seen as a sign of JPMorgan’s commitment to integrating Bear Stearns staff.

But they are leaving, partly because of problems with Bear’s mortgage portfolio. Their departure “is not exclusively because of marks on the mortgage book,” according to a person familiar with the matter, who added “there were plenty of other people involved with that.”
A JPMorgan internal announcement from Steve Black and Bill Winters, who run the investment bank, said: “Jeff Mayer and Craig Overlander have let us know that they plan to leave the company.”

Jamie Dimon, JPMorgan’s chairman and chief executive, said last week that it would take a one-off charge of $9bn to cover the losses at Bear, as well as potential litigation costs, and severance and retention payments. That number is about 50 per cent more than its original estimate of the cost of the take-over. Mr Dimon said the higher costs were driven by losses and a bigger than expected amount of bad assets on Bear’s balance sheet.

Bear and JPMorgan both declined to comment. Mr Mayer and Mr Overlander did not respond to calls and e-mails.

Looks like the only way that we would know the extant and the depth of the problems at Lehman Brothers would be if they got a takeover bid!