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.

• 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).

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.

New York City holds Bear Stearns (NYSE:BSC) stock in some of its pension funds, and along with almost all other investors in the brokerage, lost a lot of money.

According to Reuters, the NYSE controller said "I think a lot of people are going to be taking a look. ... Was there some deception in there or was this just a miscalculation?" A lot of people will ask the same question, which could lead to a lot of lawsuits.

Could a rash of lawsuits kill the Bear Stearns buyout by JP Morgan (NYSE:JPM)? Stranger things have happened.

At the heart of the argument is whether management knew that the company was falling apart when it said that it felt it would weather the storm of client withdrawals. The other possibility is that the catastrophe happened so fast that executives at Bear Stearns believed that they were OK one day and on the brink of disaster the next. Customers may have pulled money out that fast.

It will all come out in the depositions.

Douglas A. McIntyre is an editor at 247wallst.com.

Lots of big important news out lately, but I'm not doing anything differently. Nor will I ever. Because I've matured enough over the past decade to sit, wait and strike only when I see all the variables aligned. And that time still is not upon us. By buying The Bear Stearns Companies Inc. (NYSE: BSC), JPMorgan Chase & Co. (NYSE: JPM) may or may not be getting a great deal, but I'm not smart, well-informed or interested enough to really care because there are still too many conflicting variables. I only care for ideal trading opportunities, of which there are none (for my style of trading).

Since January, I've been calling for a 10%+ market drop and warning about a potential disaster not because I'm psychic, but thanks to archaic industry regulations limiting transparency, for industry outsiders, there's really no way how deeply troubled these financial firms are. Judging by Bear's buyout price of $2, even well-informed industry insiders are scared to pay too much to take on such risk.

So, just as when I featured them last week, perfectly downtrending stocks like Sprint Nextel Corporation (NYSE: S), Citigroup Inc. (NYSE: C) and Merrill Lynch & Co. Inc. (NYSE: MER) will probably continue downtrending, only more steeply this week around.

Lost in the flurry of activity over the weekend surrounding The Bear Stearns Companies (NYSE: BSC) is this morning's news that Carlyle Capital, the subsidiary of the Washington-based private equity king Carlyle Group, is 'winding up.' MarketWatch reports that Carlyle Capital, 15% of which is owned by Carlyle Group partners, has more liabilities than assets.

It is interesting that Carlyle can't utter the word 'bankrupt' -- instead preferring the innocuous-sounding term: 'winding up.' But Carlyle shareholders will be left with nothing. And, as I posted, since Carlyle borrowed $32 for every dollar of equity, or $16.6 billion, to buy mortgage-backed securities (MBS), the banks who take possession of those MBSs will probably be eager to dump them as fast as possible -- unless they think they will get a better deal by waiting.

But why wait? After all, the Fed lent $30 billion to JPMorgan Chase & Co. (NYSE: JPM) on a non-recourse basis to take over Bear Stearns's MBSs. This means that if Bear's MBSs go bad, the Fed will take the hit. Is there any active market at all right now for MBSs? If so, should the Fed just dump Bear's MBSs and take the hit now? Won't Carlyle Capital's banks do the same? And who will step in to buy all these MBSs? At what price?

Where does this all end?

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.

In the annals of Wall Street, it will simply be known as the $2 deal. That's the price tag on J.P. Morgan Chase & Co.'s (NYSE: JPM) purchase for Bear Stearns Cos. (NYSE: BSC), which has a stated book value of $84 per share.

Interestingly enough, $2 seems like a stellar deal for Bear. Keep in mind that – according to a piece in the Wall Street Journal [a paid publication] – the firm was negotiating a buyout deal while it was also preparing a bankruptcy filing. Yep, in a bankruptcy, the equity holders usually wind up with zero, especially in the case with an entity that has high leverage ratios. Oh, and the Fed and Treasury Secretary wanted a deal to get done so as to save the financial system.

No doubt, the blame-game is in full force. But, I have a partial theory to explain the meltdown. That is, a key driver in the growth of Bear has been the Information Revolution. That is, it has allowed for the structuring of extremely complex investment structures (it's breathtaking some of the things that can be done to a simple mortgage note).

The Fed has opened itself up to take some fairly weak securities from banks in exchange for funding to keep them liquid. According to Reuters: "The U.S. Federal Reserve is taking a risk by opening up its own balance sheet to the same poisonous securities that have strained banks to the limit."

The agency may feel it has little choice other than to swap good money for bad securities. The problem is that, if it does not, some large financial institutions could fail. The Fed can wait to see if the value of the securities increase over time as some subprime mortgages are paid off and locked up credit markets start to trade again. But, to think that the investments will ever be worth $1 for $1 that the Fed lends out is highly unlikely.

That means that the government has gone all the way to bailing out these companies and that tax-payers will foot the bill for tens of billions of dollars of "losses" at the Fed.

But, even if the tax-payer is asked whether he would like to pay a few more dollars to help big financial institutions stay in business or lose his job in a huge recession, he is likely to vote for paying the extra money.

Douglas A. McIntyre is an editor at 247wallst.com.

reports that JPMorgan Chase & Co. (NYSE: JPM) has closed a deal to acquire The Bear Stearns Companies (NYSE: BSC) for $2 a share -- 99% below its all-time high of $167 a share in February. On the face of it, this sounds like a low price -- $236 million. But the Fed is kicking in $30 billion to fund Bear's "less liquid assets." Taking into account the $1 billion value of its headquarters, this deal values Bear at negative $764 million.

And then there's the question of risk. According to JPMorgan, "Bear Stearns' clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns' counterparty risk. We welcome their clients, counterparties and employees to our firm, and we are glad to be their partner." I guess this means that JPMorgan's biggest "price" is the counterparty risk risk it's assuming.

I guess that explains why JPMorgan is paying $1.76 billion less than the $2 billion figure being floated earlier this evening. Nevertheless, I think the markets will like the fact that JPMorgan and the Fed have decided not to let Bear's blood drift around in those shark invested waters for more than a few days.

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.