Price of stability

17 March 2008 By Antony Currie Follow @AntonyMCurrie

Bear Stearns descent towards insolvency forced the US central bank to take drastic action: $30bn of support for JPMorgan s rescue of the Wall Street firm and discount window access for brokers to prop up the securitisation market. The Fed has rarely been this handson.

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JPMorgan has agreed to buy Bear Stearns for $2 a share. The beleaguered investment bank's stock closed at $30 a share on Friday after plummeting almost 50% in the wake of receiving emergency funding from the Federal Reserve, via JPMorgan.

JPMorgan estimates there will be some $6bn of integration costs, pretax, including litigation, deleveraging the balance sheet, and integration. The bank also expects the deal to be accretive to earnings to the tune of $1bn.

JPMorgan is providing an immediate guarantee for all business done by Bear, and expects the deal to close by the end of June.

At the same time as the deal was revealed, the Federal Reserve announced that it is opening the discount window to brokers in order to provide support for the securitisation markets.

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JPMorgan is providing an immediate guarantee for all business done by Bear, and expects the deal to close by the end of June.

At the same time as the deal was revealed, the Federal Reserve announced that it is opening the discount window to brokers in order to provide support for the securitisation markets.

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