MAJOR PAPERS:

• Harris Corporation (NYSE: HRS), concerned about its future growth, may see limited opportunity and may consider selling itself, the Wall Street Journal reported. If it does decide to sell, suitors could include Raytheon Company (NYSE: RTN), BAE Systems Plc (OTC: BAESY) and Northrop Grumman Corporation (NYSE: NOC).
• The Wall Street Journal reported that, in an attempt to toughen its regulation standards, SEC chairman Christopher Cox said earlier this week the agency would push Wall Street investment houses will have to reduce borrowing and rely less on short-term financing.
• As part of plans to reduce costs and restore profit growth, people close to the situation said that Citigroup Incorporated (NYSE: C) is likely to today identify up to $400B in non-core assets that could be sold. Additionally, the Financial Times reported that Citigroup CEO Vikram Pandit will confirm his pledge to cut the bank's cost base by about 20% at a meeting with analysts today. Sources familiar with the matter believe Pandit will dismiss calls for a break-up of the company.

OTHER PAPERS:

• According to sources, the New York Post reported that the ax may fall as early as next week on some investment bankers at The Bear Stearns Companies Inc (NYSE: BSC).

Lehman Brothers (NYSE: LEH) shares are falling today as an SEC official has warned that future investment banks that get into trouble may not get the same bailout that Bear Stearns (NYSE: BSC) did. Director of Trading and Markets at the SEC Eric Sirri told the House Investment and Insurance Subcommittee that the liquidity help given to BSC may not necessarily be repeated if another bank has trouble. These words have dragged down LEH in trading yesterday afternoon and so far today. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on LEH.

After hitting a one-year high of $82.05 in June, the stock hit a one-year low of $20.25 in March. This morning, LEH opened at $44.19. So far today the stock has hit a low of $41.67 and a high of $44.19. As of 12:40, LEH is trading at $42.67, down 0.97 (-2.2%). The chart for LEH looks neutral and improving, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.

For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 14.2% return in six weeks as long as LEH is below $50 at June expiration. LEH would have to rise by more than 17% before we would start to lose money. Learn more about this type of trade here.

LEH hasn't been above $50 since mid-February and has shown resistance around $47 recently. This trade could be risky if the company's earnings (due out in mid-June) are a positive surprise, but even if that happens, this position could be protected by resistance HSY might find from its 50-day moving average, which is currently around $45.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in LEH or BSC.

MAJOR PAPERS:

• According to senior industry sources, the Financial Times reported that the Ministry of Defense could ask General Dynamics Corporation (NYSE: GD) to provide the vehicle design for a new generation of armored vehicles for the army. It is unclear whether General Dynamics, in competition with Nexter and Artec, will be awarded the contract or will be named the preferred bidder.
• Following the collapse in March of The Bear Stearns Companies Inc (NYSE: BSC), the Financial Times also reported that the SEC will soon require Wall Street banks to publicly disclose more details about liquidity and capital positions. Cox also urged lawmakers to pass legislation that would allow the SEC, or another regulator, the "explicit mandate to supervise" investment banks.

OTHER PAPERS:

• According to the New York Times, Citigroup Incorporated (NYSE: C) will move senior investment banker Alberto Verme to Dubai by the end of the month in the hopes of establishing a stronger foothold in the region, a crucial area for global banks.
• The New York Times also reported that several large oil companies, including BP Plc (NYSE: BP), ConocoPhillips (NYSE: COP) and Chevron Corporation (NYSE: CVX), agreed to pay nearly $423M in cash in order to settle a lawsuit that alleged water contamination from methyl tertiary butyl ether, a gasoline additive. Under the terms of the deal, the oil giants also agreed to pay 70% of the future cleanup costs for the next 30 years. Exxon Mobil Corporation (NYSE: XOM) and several other companies named in the suit did not agree to the deal.

Connecticut Senator Chris Dodd has joined the baloney brigade -- the term Gary Weiss coined for the tinfoil hat crowd of conspiracy theorists who blame corporate problems on short-sellers.

Referring to the collapse of Bear Stearns, which some have blamed on shorts, Senator Dodd said that "This goes beyond rumors. This is about collusion."

Hold up. So Bear Stearns didn't collapse because of massive losses and a balance sheet like something out of a 1950s horror movie? No, apparently not. Bear Stearns collapsed because short sellers were betting it would collapse.

But isn't that like saying that the Patriots lost the Super Bowl because people bet against them in Las Vegas? The soaring short interest in Bear Stearns was an indicator of the company's problems, not a cause of them. The fact that JPMorgan needed guarantees from the Federal Reserve to acquire the company is proof of that.

MAJOR PAPERS:

• Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) and Mars are in talks to purchase Wm. Wrigley Jr. Co. (NYSE: WWY) for over $22B, the Wall Street Journal reported. An announcement may come as soon as today.
• The Royal Bank of Scotland Group Plc (NYSE: RBS) will start the integration of ABN Amro Holding's (NYSE: ABN) investment bank into its global markets division, the Financial Times reported. This process will most likely result in the paring of 7,000 jobs.

OTHER PAPERS:

• According to the New York Post, IAC/InterActiveCorp. (NASDAQ: IACI) Chairman Barry Diller is expected to meet with his board this week to restart the process of breaking up his company into five separate pieces, sources said. At the same time, Diller and Liberty Media Corporation (NASDAQ: LMDIA) Chairman John Malone are continuing to talk about a deal that would trade one or more of IAC's assets for Liberty's ownership stake in IAC.
• The UK Times has learned that Numis Securities, the stockbroking group headed by Michael Spencer, is in "advanced talks" to buy the UK equities business of The Bear Stearns Companies Inc (NYSE: BSC). Numis may look to hire a team of 25 from Bear.

FT.com reports that spreading a false rumor and selling short ahead of that rumor can get you into trouble. Paul Berliner is one such short-seller charged with spreading false stories about the Blackstone Group (NYSE: BX)'s acquisition of Alliance Data Systems (NYSE: ADS) while selling ADS shares short. If the SEC is serious, this could lead to other indictments since this practice appears rampant.

In this case, the SEC had evidence. On November 29 Berliner sent instant messages to traders at brokerage firms and hedge funds suggesting that Blackstone's deal to acquire ADS for $81.75 was being renegotiated at $70 a share. The rumor was picked up by the media and caused ADS's shares to fall 17%. Berliner agreed to settle the charges to disgorge $26,129 in profits, pay a $130,000 fine, and is banned from working for any broker or dealer.

As I posted last month, I received reports that hedge funds went a step further than Berliner. In that case, hedge funds may have caused the collapse of The Bear Stearns Companies (NYSE: BSC) and profited from its fall. A hedge fund manager in that post said: "Bear's collapse didn't surprise me. We've been short Bear for five days. All the hedge funds have been pulling their prime brokerage business from Bear."

If that hedge fund manager was telling the truth, does that make what he did legal?

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.

JP Morgan Chase (NYSE: JPM) shares are trading higher after acquisition target Bear Stearns (NYSE: BSC) posted a profit of $110 million, or 86 cents per share, just below analyst projections of 87 cents per share. The results show that BSC was able to make profits during the ongoing credit crisis. Other financial stocks also reporting good news this morning include M&T Bank (NYSE: MTB) and Schwab (NASDAQ: SCHW). This could be a good sign for JPM, which reports earnings tomorrow. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on JPM.

After hitting a one-year high of $53.25 in May, the stock hit a one-year low of $36.01 in March. JPM opened this morning at $42.18. So far today the stock has hit a low of $41.28 and a high of $42.70. As of 12:10, JPM is trading at $41.91, up $0.41 (1.0%). The chart for JPM looks neutral but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just one month as long as JPM is above $35 at May expiration. JPMorgan would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.

To quote Karen from Will & Grace, the latest twist in the demise of Bear Stearns (NYSE: BSC) is "funny because it's sad."

In a filing with the SEC, Bear Stearns disclosed (subscription required) that it had received notice that civil charges could be en route related to allegations of anticompetitive practices in bidding for municipal securities. The FTC is also alleging that Bear Stearns has violated consumer protection laws.

Let me get this straight. The executives at Bear Stearns managed to run a once-proud investment bank to the brink of ruin while simultaneously cheating their customers and competitors? That's pretty impressive stuff!. It's a little bit like hearing a rumor that the Miami Dolphins were illegally videotaping their opponents while compiling a 1 win and 15 loss season.

But this is pretty much par for the course for Bear Stearns. Gary Weiss recently wrote that Bear Stearns regularly flouted the law" and referred to its "history of sliminess." Check out Weiss' blog post for a compendium of Bear's regulatory run-ins disclosed in its 10-K.

General Electric(NYSE:GE)is blaming its huge Q1 miss on the financial markets, and Bear Stearns NYSE:BSC) specifically.

Two weeks before the end of the quarter, GE CEO Immelt did a webcast in which he said the quarter was great. Implication? Load up on the stock. And now everyone who did is hosed.

What happened? Jeff Immelt wants us to blame those nasty market conditions, the ones that were apparently unforeseeable two days before they occurred. Please. Jeff and GE shouldn't compound this disaster by further damaging their already clobbered credibility. The credit crunch started last summer.

But GE's problem isn't just the credit crunch and Bears' collapse. For example, NBC Universal was also a laggard. It posted revenue growth of 3% and profit growth of 3%; in January, GE had predicted 10% revenue growth and profit increases of 5-10%.

NBC U isn't the most important part of GE's portfolio, so it's understandable that during the earnings call this morning, analysts didn't demand an explanation of what happened with Jeff Zucker's unit. But we sure would love an answer. The best-case scenario for the NBC U division: Zucker and his lieutenants underestimated the effects of the writers strike. Worst-case scenario: It's reflective of a larger decline in the advertising business.

UPDATE FROM CONFERENCE CALL: Pathetic GE: Blame Bear Stearns For Our Mess.

See Also: NBCU: Strike Has "No Noticeable Impact" On Q4

Peter Kafka is managing editor at Silicon Alley Insider.

TheStreet.com's Jim Cramer says not all mortgage bonds are bad, and the ones with solid backing could be worth finding and buying.

Home price declines abound. Yet the mortgage bonds that are entwined with those homes are going up. So what's going on?

I think that what is happening is that the bonds themselves are not "as bad" as people think. There are several kinds of bonds out there that have to do with mortgages. Some of them are combinations of Home Equity Loans, and when you read that home prices have declined, many of these bonds could be worthless. But we are now becoming able to figure out that there are some homes that are not being walked away from, and if that paper can be found it might be a buy.

It's the latter that is trading and is taking the pressure off the Merrills (NYSE: MER) (Cramer's Take) and the Citigroups (NYSE: C) (Cramer's Take), and that's why you can hear Merrill say it doesn't need more capital. The inventory is rising in value or being sold at prices that are higher than we thought or that were marked.

JP Morgan Chase (NYSE: JPM) closed at $46.24 Wednesday.

JPM is scheduled to report Q1 EPS on April 16. JPM April option implied volatility of 46 is above its 26-week average of 39 according to Track Data, suggesting larger price movement.

Bear Stearns (NYSE: BSC) volatility is at four-week lows as JPM buyout spread tightens.

BSC closed at $10.86 Wednesday. JPM revised its buyout offer for BSC on Mar. 25 to 0.21753 shares. BSC over all option implied volatility of 70 is at four-week lows according to Track Data, suggesting decreasing risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

MAJOR PAPERS:

• According to the Wall Street Journal, troubled Ohio bank National City Corporation (NYSE: NCC) is considering a plan to sell itself to rival KeyCorp (NYSE: KEY), people familiar with the matter said.
• The Financial Times reported that Lehman Brothers Holdings Inc (NYSE: LEH) yesterday said it had sent information to the SEC about possible abusive short-selling in its shares in recent days. Lehman CFO Erin Callan said the SEC was examining whether hedge funds collaborated to drive down the bank's share price in the days following the near collapse of The Bear Stearns Companies (NYSE: BSC).
• Colombia's heavy oil area could hold 20B barrels of recoverable resources, the Financial Times reported, giving the country greater reserves than leading producers such as Mexico and Algeria, according to Colombia's government.

WEB SITES:

• The Silicon Alley Insider reported that Douglas Merrill, Google Inc's (NASDAQ: GOOG) CIO, is leaving the company to become the president of music company EMI.

With news that Bear Stearns (NYSE: BSC) CEO James Cayne has sold all of his holdings in the stock for $61 million, I actually feel sorry for him. Usually when a senior member of management sells stock it's cause for worry, but in this case, what would you have done?

According to the AP report: " Cayne sold 5.66 million shares for exactly $10.84 a share on March 25, according to a filing with the Securities and Exchange Commission. His stake was once valued at about $1 billion when the stock was trading at $171.50 per share."

With all due respect, the man has invested the last 15 years of his life in the company, and to go from being a billionaire, to someone with tens of millions of dollars overnight is a sad story. Now I know you are all going to comment that he still has $60 million, and it was his fault that the bank came crashing to the ground, but that kind of fall must be hard.

If I was in his position I would have sold everything as well. He needs to protect whatever he has, and if he can walk away with a small fortune, then all the more power to him.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 3/28/08

BusinessWeek reports that the $29 billion "loan" that the Fed is making to finance JPMorgan Chase & Co. (NYSE: JPM)'s $1.2 billion acquisition of The Bear Stearns Companies (NYSE: BSC) is really an equity investment in $30 billion worth of mortgage-backed securities (MBSs).

If that investment goes sour, taxpayers will suffer. I think we deserve to know more of the details of those MBSs before the deal closes. For instance, what would a buyer be willing to pay for those MBSs in the open market? If the answer is 10 cents on the dollar, why should taxpayers be on the hook for the losses?

To do the deal, a Delaware-based limited liability company (LLC) will receive the $30 billion worth of Bear MBSs. The Fed will "lend" $29 billion to that company, which will pass all the money along to JPMorgan. JPMorgan will contribute a $1 billion loan to the LLC and BlackRock ­Financial Management will pay back the LLC's loans by gradually liquidating the assets. The Fed gets paid back fully before JPMorgan gets back anything on its loan. And if, after JPMorgan gets paid back, there's money left, the Fed gets it all.

When I heard the recent news that Bear Stearns (NYSE: BSC) was the first, and hopefully only, major financial institution that was going under as a result of the recent credit fiasco, I wondered just how fast the company would be ripped apart and sold off in chunks. Well, the deal is not even finalized yet, and we are already seeing parts of the company up for sale -- just not the parts one would imagine. It seems that some Bear Stearns workers are quickly looking to cash in with some creative eBay Inc. (NASDAQ: EBAY) auctions.

If you head over to eBay's auction site and search for Bear Stearns, you will currently find 201 items listed for auction. Items include all sorts of memorabilia of the soon to be devoured financial institution. You can pick up t-shirts, coffee mugs, stuffed animals, and even a nice lunch with a friendly Bear Stearns employee (current bid only $1.99, reserve not yet met)!

The lunch really caught my attention, and if I lived in New York I think I would be willing to bid up to at least $10 for this adventure. The seller is also including in the deal a menu and souvenir cafeteria card. Not a bad deal if you are the lucky winner. The seller promises "Huddled whispering, shell-shocked expressions and dazed employees." Of course the buyer will be responsible for transportation to and from Bear Stearns.