Update! Despite earlier reports, JP Morgan has raised the bid for Bear Stearns from $2.00 a share to $10.00 after major negative feedback from stockholders. This puts JP Morgan’s ante up to roughly $1 billion. The Fed will lend JP Morgan another $29 billion to seal the deal. What’s in it for the Fed you may ask? Well, if the securities in question – high risk mortgages mainly – sell for more than the $30 billion they are valued at now then the Fed takes the profit.
The deal is even sweeter for JP Morgan. If these securities fail to sell for more than $30 billion they are only on the hook for the first $1 billion and the Fed is responsible the rest of the loss.
