Bear Stearns Cos' 85 years as an independent Wall Street firm may be coming to an end as JPMorgan Chase & Co considers buying the crippled company.
Teetering on the brink of collapse from a lack of cash, Bear Stearns got emergency funding on Friday from the US Federal Reserve and JPMorgan in the largest government bailout of a US securities firm. The move failed to avert a crisis of confidence among Bear Stearns' customers and shareholders, who drove the stock down a record 47 percent.
After denying earlier this week that access to capital was at risk, Bear Stearns chief executive officer (CEO) Alan Schwartz said on Friday that the company's cash position had "significantly deteriorated" in the past 24 hours. The Fed agreed to provide financing through JPMorgan for up to 28 days, the bank said in a statement on Friday.
Now JPMorgan, led by CEO Jamie Dimon, is considering buying Bear Stearns, three people briefed on the matter said. No agreement has been reached and it's possible no deal will be completed, said the sources, who declined be identified because the discussions were confidential.
A person close to JPMorgan said the bank might also be interested in buying Bear Stearns' prime brokerage unit, which provides loans and processes trades for hedge funds.
Dimon, whose firm has suffered fewer losses than rivals during the credit-market contraction, has said that he would be open to making an acquisition.
The bank has "plenty of capital," he told the audience at a dinner hosted by the Economic Club of Washington last week.
Other potential Bear Stearns buyers include private equity firms such as J.C. Flowers & Co, the Wall Street Journal reported.
HSBC Holdings Plc, Europe's largest bank by market value, also has the resources to make an acquisition.
Bear Stearns, founded in 1923, acted in response to "market rumors" of a liquidity crisis, Schwartz, 57, said in a separate statement.
He said earlier this week that the company's "liquidity cushion" was sufficient to weather the credit-market contraction. Traders have been reluctant to engage in long-term transactions with Bear Stearns as a counterparty, the Wall Street Journal reported on Wednesday.
"We have tried to confront and dispel these rumors and parse fact from fiction," Schwartz, who was named CEO less than three months ago, said in the New York-based company's statement on Friday. "Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated."
The announcement caused financial shares to plunge, with Bear Stearns tumbling US$27 to close at US$30 in New York Stock Exchange composite trading.
The stock has lost 66 percent of its value this year. The sinking share price has wiped out US$10.5 billion in shareholder value in the last three months.
Bear Stearns' long-term counterparty credit rating was reduced three levels to BBB by Standard & Poor's.
The rating may be cut further, New York-based S&P said. It lowered the short-term rating to A3 from A1.
Bear Stearns helped trigger a crash in the market for home loans after two of its hedge funds collapsed last July.
During a conference call with analysts and investors after Friday's announcement, Schwartz said that the company's book value was "fundamentally" unchanged.
BRIBERY CASE: President Tsai Ing-wen accepted Su Jia-chyuan’s resignation as he said that he deeply regretted causing trouble for the president due to the investigation Presidential Office Secretary-General Su Jia-chyuan (蘇嘉全) yesterday resigned after his nephew, Democratic Progressive Party (DPP) Legislator Su Chen-ching (蘇震清), was implicated in a bribery case related to a dispute over the ownership of Pacific Sogo Department Store (太平洋崇光百貨). “I resigned from the post so that President Tsai Ing-wen (蔡英文) would not be bothered by it anymore, and the prosecutors can investigate the case in a fair and just manner. I thank President Tsai once again for supporting me. May the country continue to prosper under her leadership,” Su Jia-chyuan said in a statement. The Presidential Office said that Tsai has accepted
ALEX AZAR: The first visit by a head of the Department of Health and Human Services would strictly observe the CECC’s special regulations, the Ministry of Foreign Affairs said US Secretary of Health and Human Services (HHS) Alex Azar is to lead a delegation to Taiwan — the highest-level visit by a US Cabinet official since the two sides cut formal relations in 1979. The plan was announced yesterday morning by the US Department of Health and Human Services and confirmed by the Ministry of Foreign Affairs (MOFA). Beijing has expressed its concerns to Washington, Chinese Ministry of Foreign Affairs spokesman Wang Wenbin (汪文斌) said later yesterday. Taiwan and the US only issued statements saying that the visit would happen “in the coming days.” MOFA said that due to security concerns, it would
‘CROSS-STRAIT CONSIDERATIONS’: Groups said that the Ministry of Education’s policies excluded Chinese and students should not be blocked over political issues The Taiwan International Student Movement yesterday said it would protest today outside the Ministry of Education in Taipei against a policy that excludes some Chinese students from returning to Taiwan amid the COVID-19 pandemic. Since June 17, the ministry has allowed foreign students from 19 “low risk” and “medium-low risk” countries and regions to enter Taiwan. On July 22, it announced that it was relaxing restrictions to include students from all countries and regions who are graduating this semester and on Wednesday it further expanded entry to students enrolled in degree programs. A letter sent by the ministry on Wednesday to universities did
The military last week sent “no small number” of Marine Corps officers to the Pratas Islands (Dongsha Island, 東沙群島) following reports of a Chinese People’s Liberation Army (PLA) drill targeting the islands scheduled for this month. In an interview with Hong Kong’s Bauhinia Magazine published on Saturday last week, PLA National Defense University professor Li Daguang (李大光) confirmed that the Chinese army was planning to stage a simulated invasion of the Pratas Islands in the South China Sea this month. The islands comprise three atolls, with Pratas Island, at 1.74km2, being the largest. They lie southwest of Taiwan proper in the South