Rebirth of England

On March 6, two days after the Federal Reserve decided to rescue Bear Stearns, U.S. Treasury Secretary Paulson said that he supported the Federal Reserve's move to rescue Bear Stearns and believed that the Federal Reserve had taken appropriate action.

Paulson said in a television interview that day that the Fed had taken appropriate actions to work with market participants to minimize the impact of the financial crisis.

He believes that the Federal Reserve's rescue of Bear Stearns has prevented other financial companies and even the U.S. financial system from suffering greater damage.

Paulson expressed his confidence in the U.S. financial market to escape from the current chaos and believed that the U.S. economy still has the ability to regain its vitality. At the same time, he believed that a strong dollar was in the interest of the United States.

Is this really true?

On Friday afternoon, Standard \u0026 Poor's downgraded Bear Stearns' long-term credit rating to BBB and said further downgrades were likely based on the company's lack of liquidity.

Moody's also downgraded Bear Stearns, which now ranks it three notches above junk.

Many analysts believe that Bear Stearns is most likely to be sold within 28 days of receiving the emergency loan.

Wall Street generally sees JPMorgan Chase and other big banks as possible buyers.

According to Bloomberg reports, sources revealed that JPMorgan Chase has expressed interest in buying Bear Stearns.

The Wall Street Journal reported that private equity firm J.C. Flowers \u0026 Co. may also acquire Bear Stearns, and the New York Times reported that the Royal Bank of Scotland may be interested. In addition, Standard Chartered Bank also has the strength to make an acquisition.

After all, Standard Chartered Bank can be said to be one of the few major banks in Europe and the United States that does not involve in the trading business of subprime loan bonds CDO - as for the reasons, everyone knows.

Therefore, instead of suffering losses in the subprime mortgage crisis, Standard Chartered Bank took the opportunity to first acquire the British bank Northen Rock, which was caught in the run crisis, thereby expanding its business into the British market.

However, Davis, President of Standard Chartered Bank, said in an interview:

The most important thing for Standard Chartered Bank at the moment is to complete the integration of Northrock Bank into the Standard Chartered Bank system and resolve the non-performing assets they had formed due to their wanton granting of housing mortgage loans. Before that, they had no plans to expand again. .

"The most ideal option for Bear Stearns at present is to sell it as a whole to JPMorgan Chase..."

Barron, who returned to London, said to Daisy in the office of DS Financial Center:

"This can prevent Bear Stearns from being eventually dismembered...In fact, by the time they ask the Federal Reserve for help, Bear Stearns has already lost its status as an independent bank, and it will be a matter of time before it is sold."

"Although Bear Stearns is in deep crisis, there are actually some good assets that are still attractive. Why don't we take the opportunity to make acquisitions?"

Facing Daisy’s question, Barron said calmly:

"You are right. Although Bear Stearns has been put on the stall, it is still a piece of fat. But the problem is that not every piece of fat can fall into our mouths. We are surrounded by wolves. We can only choose the one that suits us best, otherwise it will attract hatred. ”

Sure enough, on March 7, JPMorgan Chase Bank announced that it would acquire Bear Stearns at an ultra-low price of US$2 per share, totaling US$236.2 million.

This acquisition price is only equivalent to 1% of Bear Stearns's former market value of US$20 billion.

However, their ultra-low bid was strongly resisted by Bear Stearns shareholders. They claimed that if such acquisition conditions were met, Bear Stearns would seek other acquirers...

Finally, after numerous negotiations, on March 14, JPMorgan Chase and Bear Stearns reached a new agreement.

In this new agreement, JPMorgan Chase agreed to increase the share exchange ratio, which is equivalent to increasing the acquisition offer from US$2 per share to US$10 per share, with a transaction value of US$1.19 billion. At the same time, JPMorgan Chase will also purchase 95 million shares of Bells. The issuance of additional shares will increase JPMorgan Chase's shareholding in Bear Stearns to 39.5%.

Even the shareholders of Bear Stearns are still a little reluctant, but the situation is stronger than others. If they cannot agree to this condition, then what awaits them is that their funds will be withdrawn and Bear Stearns will go bankrupt...

After all, at this time, even other acquirers would be hard-pressed to come up with better acquisition terms - who brought Bear Stearns to this point...

Relatively speaking, it may be acquired by JPMorgan Chase and exchange the Bear Stearns shares for JPMorgan Chase shares. Although it will still suffer heavy losses, there is at least the possibility of turning around in the future.

This is also the best choice they can make...

It is worth mentioning that Bear Stearns caused the current consequences and became the first of the five major Wall Street investment banks to be acquired during the subprime mortgage crisis. It is not without reason.

Although Wall Street capital itself believes in the law of the jungle, when the media reported that Bear Stearns was "downbeat", no other bank stepped forward to help Bear Stearns. It can be said that "you reap what you sow." You reap what you sow.”

Because Bear Stearns had treated other members of Wall Street with such disdain.

It can be said that the seeds for today's results were planted at least 10 years ago.

In 1998, it was Bear Stearns, headed by Cain, that refused to join its Wall Street counterparts in the Fed-backed bailout of the highly leveraged hedge fund Long-Term Capital Management.

After it refused to help save Long-Term Capital Management, Bear Stearns became a true outcast, with almost no friends among other banks or regulators.

When the crisis occurred, no one stood up to publicly refute the initial rumors about Bear Stearns, but they had helped Lehman Brothers, which was also troubled by similar rumors two weeks ago.

Bear Stearns' reputation for doing its own thing eventually made it lose people's trust on Wall Street.

This is also the main reason why Barron did not participate in this acquisition of Bear Stearns. After all, the people behind the capital on Wall Street hoped that they would complete the "closing" of Bear Stearns. If Standard Chartered Bank intervened, it would easily arouse public anger.

Moreover, Bear Stearns itself is different from Merrill Lynch. They do not have commercial banking business in the United States, so they are not the best target for Standard Chartered Bank to acquire.

In this case, he only needs to quietly earn satisfactory and generous profits by shorting Bear Stearns.

Well, it wasn't just Bear Stearns. Affected by this incident, bank stocks across the United States fell a lot, and the Black Swan Fund also expanded its profits from the subprime mortgage crisis.