B1.
Stock close at 62.30--11% plunge
Alan Schwartz=BS, Liq, and Cap strong
Last year had to defend because 2 internal hedge funds insolvent
-3.4B in MV
Option traders-right to sell bear at low prices
Cost against default rising
Lowered ratings by Moody’s
Originator of residential mortgages/pack into securities
B2
Bear share=47% decline in one day
Dow -195 points
JP Morgan will borrow from Fed and lend to Bear--first time since Great Depression--risk by JPMorgan
Paulson-Bank’s are very strong and will come out of it
Buyer’s include JPMorgan and Citadel Investment Group (bought E*trade)
-response-cut 1.25points fed rate in 10 days, fiscal stimulus from congress
Employees could not trade shares because of longstanding “lockups” weeks prior to the company’s earnings announcements.
2 hedge funds failed in july
Much of bear invested in mortgages and not as diverse as other IBs
-fears of downfall caused investors to stop trading with Bear
-further caused problems
-Schwartz called Dimon -JPMorgan was clearing agent for Bear trades
-7:30 pm no deal yet-Fed decided to step in
-Fed decided a bailout using a legal clause-since 3 of governors on vacation-remaining 4 would have to agree on bailout
-did not want to encourage future risky behaviors
-offered loan via JPMorgan (Commercial bank)àhas access to discount window.
-besides being Bear’s creditors, JPMorgan is regular trading partner with Bear-so can face huge losses
-JPMorgan wants Bear’s PB business-because it makes a lot of money and JPMorgan does not have it.
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B3
List of financial troubles
-major writedowns
-economic downturn and stimulus plan by Bush
-March 10--rumors that Bear doesn’t have cashàbear claims no ...