$2 a Share?
Posted on March 16, 2008 in the Commentary category
.I was shocked to read that JP Morgan was buying Bear Sterns for the bargain-basement price of $236.2 million. That translates into a price of only $2 a share!
This a stunning collapse for a company that was trading at near $100 only 3 months ago
And to top it off, J.P. Morgan’s risk of even putting up $236 million is somewhat limited by the Fed, which is taking the extraordinary step of funding up to $30 billion of Bear Stearns’ less-liquid assets.
The Bush administration will ”do what it takes” to stabilize chaotic markets and minimize the economic damage, Treasury Secretary Henry Paulson said Sunday after a tumultuous week capped by the government rescue of a teetering investment bank.
The clear message from the Fed and the administration is that the economy is too fragile at the moment to let a major financial institution fail. Bear Sterns is not the only company that is in financial trouble, As the mortgage and credit crisis deepens, other companies will need help. Will the Fed be there to rescue them all? If they are, then what happened to our free-market economy?
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