JPMorgan reported to be buying Bear

Price will be about $20 a share. Bear Stearns closed Friday at 30, down 27. Talk about deep pockets. Will JPMorgan be getting government backing? Even if they do, it’ll stave off, at least for now, a calamitous collapse.

The real problem with Bear is the counterparty risk, the trillions of dollars (yes, trillions) of swaps, trades, agreements that Bear has with other institutions. A non-functioning Bear means all those trades go south for whoever is on the other end, and that could trigger cascading defaults.

Then, I’m guessing, the Fed will have to deal with a wobbling Lehman Brothers.

Comments are closed.

Powered by WordPress. Designed by WooThemes