Bear Raid
The SEC released a statement about Bear Stearns:
The Securities and Exchange Commission’s division of trading and markets said that the decision to supply temporary funding to Bear Stearns Cos. (BSC) followed a “significant deterioration” in the bank’s liquidity on Thursday.
SEC officials said in a statement that they had been monitoring Bear Stearns’s financial situation on a daily basis in recent weeks, and had no cause for alarm earlier in the week. Bear’s holding company capital exceeded regulatory standards at the end of February, and information supplied by Bear Stearns to the SEC on Tuesday showed the holding company had a “substantial capital cushion,” according to the SEC. As of that date, the firm had more than $17 billion in cash and unencumbered liquid assets, the SEC said.
“Beginning on that day, however, and increasingly throughout the week, lenders and customers of Bear Stearns began to remove funds from the firm, despite its stable capital position. As a result, Bear Stearns’s excess liquidity rapidly eroded,” the statement says.
On Friday, federal officials announced a deal to provide a 28-day loan to Bear Stearns through Federal Reserve borrowing by JPMorgan Chase & Co. (JPM). The SEC division that oversees U.S. markets said it is continuing to monitor Bear Stearns’s condition and believes its registered broker-dealers “remain in compliance with commission capital rules.”
The SEC reiterated that it is working closely with the Treasury Department, the Federal Reserve and the Federal Reserve Bank of New York to ensure that its regulation contributes to “orderly and liquid markets.”
March 16th, 2008 at 2:37 pm
If the Management of Bear Stearns is confident in the future viability of the firm why don’t they announce that they will be putting more of their own funds into the firm at this do or die moment. If there is value left in Bear the insiders are surely the ones who are in the position to buy some more equity in the firm. If they are not willing to invest it indicates that their is not much value left. Are they going to let thier options expire?
March 16th, 2008 at 3:36 pm
If management argues that the firm is worth $80 per share book value. Why don’t they arrange a management buyout at $10 per share?
March 16th, 2008 at 4:12 pm
You need cash for a quick buyout and cash is in short supply. The problem is funding the balance sheet, a management buyout doesn’t solve that, they need to put a huge amount of equity or raise a huge amount of cash via debt markets to restore confidence. Time is short, they aren’t to many options, JPM and that’s it.
March 16th, 2008 at 8:26 pm
My custodian is my “savior.” At 1/20th of the number I’m going to have to type below, and, what, less than 1/50th of the deal James E. Cayne turned down a while back.
Cayne is in Detroit this weekend; he was fourth after Thursday’s matches, but fell to the mid-20s yesterday.
March 16th, 2008 at 8:43 pm
NEVER MIND. $2 a share. Why not a $1.99?
March 16th, 2008 at 8:58 pm
Well it’s not a cash deal, it is probably worth less than $2, I doubt JPM will be up tomorrow.
0.05473 JPM share for 1 BS