Mark DeCambre
Updated from 3:32 p.m. EDT
Bear Stearns'(BSC Quote - Cramer on BSC - Stock Picks) stunning acknowledgement of major liquidity problems Friday put the 85-year-old firm's future as an independent company in doubt. Bear shocked Wall Street early Friday after disclosing an emergency rescue plan through which JPMorgan Chase(JPM Quote - Cramer on JPM - Stock Picks) agreed to provide the firm with much-needed cash borrowed through the Federal Reserve Bank of New York's discount window. CEO Alan Schwartz said during an afternoon conference call that advisory firm Lazard(LAZ Quote - Cramer on LAZ - Stock Picks) was working with the firm to help it consider its options. Lazard had also advised Bear to tap JPMorgan for its bailout, in part, because of the bank's familiarity with the beleaguered investment firm.
"In consultation with [Lazard] we decided to talk to JPMorgan to provide a liquidity position and achieve the objective of calming down the marketplace," Schwarz said during the relatively brief call.
JPMorgan will lend to Bear through a secured loan facility backed by the New York Fed's discount window. The facility has an initial period of 28 days, but Bear and JPMorgan did not specify an amount and additional details about the loan were not provided on the call.
Schwartz said that securing a cash plan via JPMorgan allows the firm to buy more time to underscore to its customers that it is not strapped and that it is a going concern in the long term.
So far, Bear's efforts, including its call this afternoon, have done little to alleviate skittish investors and worried employees. Many rank-and-file staffers within Bear were still in a bit of panic about the health of their firm and wondering whether the latest moves were a prelude to an ultimate sale of all or part of the firm.
In fact, one of the options Lazard also is charged with identifying for the firm is possible sale of assets. Bear had hoped to move at its own pace in working through its alternatives but the recent run by lenders and other clients is forcing the firm's hand.
In some ways JPMorgan providing a bailout for Bear Stearns' places the bank, headed by CEO Jamie Dimon, in perfect position to take advantage if Bear falters. Bear's businesses, including prime brokerage and Bear Stearns Asset Management, while smarting from early subprime wounds, are immensely strong platforms that are coveted by rivals. JPMorgan does not have a solid prime brokerage platform.
JPMorgan has said publicly that it is in the market for a prime brokerage platform and a person close to the bank told TheStreet.com that Dimon views Bear's prime brokerage platform as an attractive asset.
On the call, Schwartz said that Bear would "pursue alternatives with a focus on ensuring that we can handle and protect our customers."
Calls to a spokesman at Bear was not returned nor was a call to a spokeswoman at JPMorgan.
Ken Fisher, CEO of money management firm Fisher Investments, said that he believes that from a custodial standpoint, Bear has a zero risk because legally it is set up separately from the investment firm and is therefore insulated. Fisher's firm manages approximately $45 billion serving large corporate and public pension plans. The firm clears about $2 billion to $3 billion of its trades via Bear.
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