Money-Rx Blog

Bear Stearns head honcho Alan Schwartz has an overflowing cup of woes. The latest to pile on is the Securities and Exchange Commission. From Forbes - The SEC's enforcement division has written a letter to JPMorgan Chase saying the staff discussed "investigations and potential future inquiries into conduct and statements by Bear Stearns" before the announcement of the takeover. However, it added that the staff "would favorably take into account" the circumstances surrounding the takeover when considering whether to recommend enforcement action against JPMorgan for public statements made by Bear Stearns.

On another front, Bear shareholders, as I wrote here, are teaming up to nix the $2 sale of Bear Stearns to JPMorgan. Reuters reports that Bear Stearns Cos Inc Chairman James Cayne and top shareholder Joe Lewis are quietly searching for a bidder that would top the offer from JPMorgan Chase & Co. Cayne and Lewis have contacted private equity firms, including J.C. Flowers and Kohlberg Kravis Roberts & Co KKR.UL, as well as overseas banks Barclays, HSBC, Credit Suisse and the Royal Bank of Scotland. Cayne and Lewis combined hold nearly 15 percent of the stock of cash-strapped Bear Stearns.

And to add fuel to the fire, JPMorgan's executives are clashing for control of day-to-day management with shell-shocked Bear Stearns employees. The New York Times reports on the actual situation in the Bear Stearns building. Inside Bear, it is already clear that the new bosses have arrived. On Wednesday, as Mr. Dimon made his way across the street under March skies as dreary as the mood inside Bear, a JPMorgan security guard stood watch at Bear’s entrance. JPMorgan executives have appropriated offices for private meetings and begun placing calls from the desks of Bear executives. In the past few days there have been several instances when Bear employees have lashed out at the JPMorgan executives, creating awkward moments. Mr. Dimon, the chairman and chief executive of JPMorgan Chase, made an appearance at Bear Stearns...“In this room are people who have built this firm and lost a lot, our fortunes,” one Bear executive said to Mr. Dimon with anger in his voice. “What will you do to make us whole?” The packed room of senior managing directors applauded.

On another front, the financial media is buzzing over the puzzle of why exactly Bear Stearns shares are rising. Everyone has their own theory. One story has it that Bear's bondholders are buying up shares so as to be able to vote for the deal and keep the firm out of bankruptcy, thus protecting their investments. Another angle is that the above mentioned, and other, shareholders are buying up shares so as to be able to vote against the deal, in hopes of getting a better offer, thus safeguarding their invetsments. Bear's sharehoders just lost a pretty packet because the firm screwed up and their stock tanked, but in order to save it, they have to buy some more of the same? Keep digging, keep digging....