Social Welfare State For The Rich:JPMorgan Ups Bid For Bear Stearns

Posted on March 24, 2008
Filed Under News |

As millions of Americans face the very real prospect of being thrown out of their own homes because of the subprime mortgage mess, one of the more guilty parties who helped cause the debacle, Bear Stearns, is now almost being rewarded for its criminal like behavior.

JPMorgan Chase today raised its takeover offer so that Bear Stearns is now valued at slightly more than $2 billion, which is a hell of a lot better that $236 million, which was the firm’s value after the “old” deal was supposedly finalized.

This means shares of the company which dropped all the way down to $2 per share Friday,will now come in at roughly $10 a share, easing the pain for employees and management of Bear Stearns, many of whom saw virtually their entire savings wiped out.

Welfare for the Rich

If this were all just a deal between two private companies, that would be one thing. But, it is not. The Federal Reserve is making this deal possible by backing it.

And, you know what that means?  Right. Taxpayers could end up holding the bag.

As Reuters rightly points out, the new deal “is likely to raise concerns that the U.S. government is prepared to help rescue Wall Street bankers even as million of home owners face the possibility of foreclosure.”

Sure looks that way, doesn’t it?

Comments

3 Responses to “Social Welfare State For The Rich:JPMorgan Ups Bid For Bear Stearns”

  1. Steve on March 24th, 2008 7:34 pm

    Since we funded the deal, do the American public get stock in exchange for their money?

  2. Sean Hackbarth on March 24th, 2008 8:23 pm

    The Fed can keep any profits from the sale of the $30 billion in Bear Stearns securities. If there are any losses JP Morgan takes the first $1 billion.

    I also would even say Bear is being “almost rewarded.” $10/share is far down from the $57/share the stock was at on March 14.

    One other thing to mention: it’s far cheaper for the Fed to dole out $30 billion on Bear Stearns then the hundreds of billions in bad subprime loans.

    My concern is about moral hazard so don’t accuse me of thinking assisting the buyout was a great thing.

  3. charles on March 24th, 2008 9:38 pm

    No, I don’t think you feel the Fed stepping in to bail Bear is a great thing.

    But, I do think the taxpayer liability is potential very great and,therefore,somewhat dangerous.

    Yeah, JP may take the first billion dollar hit if things so even farther South for Bear–though that hardly seems possible?–but, that still leaves the Fed in not the greatest shape on this.

    I’ll stand by my statement that Bear is almost being rewarded for its bad( criminal??) behavior. The fact is, there are some there who shouldn’t just lose jobs, but should also lose their freedom since Bear was one of the worst offenders in the subprime area.

    So, anything more than a penny per share in my book is a reward….and, even a penny might be too much!

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