JPMorgan-Bear Stearns
By Dan Freed
Objective: Improve certain parts of its investment bank (while also preventing a global economic meltdown.)
Impact: JPMorgan was originally going to pay $2 per share for rescuing Bear Stearns from bankruptcy but agreed to lift its consideration to $10 per share following an outcry by theoretically powerless shareholders. The Federal Reserve backstopped $30 billion worth of losses as part of the deal, which closed May 29, 2008.
JPMorgan was arguably the world's most powerful investment bank before it bought Bear Stearns and its claim to that title was even stronger after the purchase.
Impact: JPMorgan was originally going to pay $2 per share for rescuing Bear Stearns from bankruptcy but agreed to lift its consideration to $10 per share following an outcry by theoretically powerless shareholders. The Federal Reserve backstopped $30 billion worth of losses as part of the deal, which closed May 29, 2008.
JPMorgan was arguably the world's most powerful investment bank before it bought Bear Stearns and its claim to that title was even stronger after the purchase.
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How much of JPMorgan's slight investment banking revenue gain can be attributed to the acquisition is debatable. The narrowing of the competitive field likely accounted for part of the increase, but Goldman Sachs also benefited from this phenomenon, and it saw a year-over-year decline. Then again, Goldman's heavy reliance on capital markets-based funding proved a serious liability during the crisis, potentially threatening the firm's very existence, while JPMorgan had no such issue to contend with.
Anecdotal evidence suggests JPMorgan is now stronger in businesses like prime brokerage and energy trading following the Bear Stearns deal, but the bank does not break out details about the profitability of these operations.
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