It was clear yesterday from the stock price action that The Bear Stearns Companies (NYSE: BSC) was facing some pain. The stock plunged yesterday to a five-year low on liquidity concerns, according to Bloomberg News. Bear rolled out its executives in an attempt to alleviate those concerns.
But today's news of a bailout to ease a liquidity squeeze is a major shock. The Wall Street Journal reports that JPMorgan Chase & Co (NYSE: JPM) and the Federal Reserve Bank of New York are arranging financing for Bear Stearns. Bear's stock is down more than 15% in early trading on the news. And the Dow is down 234 points.
The Journal reports that Bear Stearns CEO Alan Schwartz, in noting the liquidity rumors, said in a separate statement that "amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."
This move raises many questions: How much money is being raised? Why is the Fed getting involved instead of private investors? How bad is the problem really? How much of Schwartz's comments are covering up for a really bad situation? Is this a government bailout for Bear Stearns's bad decisions?
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.











Reader Comments (Page 1 of 1)
3-14-2008 @ 10:39AM
jo said...
Every day It is another one?
3-14-2008 @ 10:44AM
John said...
I look forward to the day when an oil and gas company gets bailed out.
3-14-2008 @ 10:46AM
m gross said...
So, gigantic salaries and perks for all the top boys, and now a government bailout.
Seems fair.
Not.
How about a fire sale of executive assets to prop them up, before we start using money from people who can never hope to earn that much in a lifetime?
3-14-2008 @ 11:21AM
rick v said...
let em go like the housing market.
they are part of the bad home loan problem we are all paying for.
3-14-2008 @ 12:29PM
paul said...
Maybe I could get a government bailout for my bad decisions too! Like that time share. Hey government, I was dumb, give me money!
3-14-2008 @ 2:21PM
Fred said...
Let um sink with the other ships who had lousy navigation and a greedy captain who slept at the helm.
3-14-2008 @ 2:35PM
Gary said...
How long can we,the tax payer, to bail out greedy banks,lenders,stockbrokers,etc. Bear Stears probably payed out hugh bonus to it's employees and now we have to bail them out to save our economy. Where are our Fed's when we need them?????????
3-14-2008 @ 5:44PM
dan said...
Let Bear Stearns go down........No Bailout !!
Sell it off.......Give the Execs a choice give back all the compensation, they did not earn, No reward for lack of manangement.......or Jail time!
3-14-2008 @ 6:23PM
david said...
Its bad enough we had to go for years on end reading all the headlines about how big the bonus's were on wall street, and how expensive the art was they were purchasing, and how big the yachts were. yada yada. LOL, now they not even making them sweat this out before they plow them with our hard earned tax dollars. Isn't it common sense that asset prices across the board must come to down to their fair values? Isn't that what creates a bottom? Just like prices must get overblown before they peak. Uhh, didn't we learn that in 9th grade economics? All these hotshot superstar Ivy leaguers are getting showered with money right out of school and they led us into the HUGE finaincial mess. Too funny. And the Irony of it all is that the ONE man who could really neutralize these slimebags on wall street is completely out of the picture. SO, do we bring back the Spitz master to take the gloves off? No one can deny he is a brilliant prosecutor, and knows how to play Wall Street's game!
3-14-2008 @ 11:53PM
some guy said...
I have heard that other banks have cut Bear off. No one is trading with them, and no one is doing anymore financing for them. They are screwed.
Good.
I hope the rest of the street cuts them off at the knees.
Bear Stearns was a mismanaged company that deserves to die a sudden and very public death.
They leveraged themselves to the hilt, and made money as long as the market was moving up. The firm was pretty smug about it. Wall Street Geniuses.
Maybe this will wipe that smug little expression off the face of the company.
3-15-2008 @ 8:54PM
Expow said...
Wish the banks would quit opening satelite banks. To many!
3-15-2008 @ 11:01PM
Ronyrocket said...
What happened to savings, the stuff companys should have put back from all the millions they made ripping people off with the trades and deals they made in the past years......yes bought the big boats, big party's and the big houses. make the suckers sell the company percks and put back into the company and then cut all pay to the execs. then check to see if they are still hurting or not.It's time to cut back, not only the american people but also these over payed gurues, who are over payed.
3-25-2008 @ 3:37PM
momma bear said...
Hey, great news. I own a business that is suffering tremendously due to the down turn in building and the housing industry. Where do I sign up to get my bail out? If BS gets one, why not me?