In a shocking deal reached on Sunday to save Bear Stearns, JPMorgan Chase agreed to pay a mere $2 a share to buy all of Bear — less than one-tenth the firm’s market price on Friday. As part of the watershed deal, JPMorgan and the Federal Reserve will guarantee the huge trading obligations of the troubled firm, which was driven to the brink of bankruptcy by what amounted to a run on the bank. (New York Times, Monday)
The stage is set for the next round of moral hazard.
FEE Timely Classic
The Great Banking Scandal by Hans F. Sennholz
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