Reply #6: relax, it's actually only $29 billion, not 30, so that makes it perfectly reasonable.

[unblock]

it was originally $30bn, as part of the original $2/share deal. there was too much hue and cry over jpmorgan getting a steal with no risk, so they upped it to $10/share and took a first loss position on $1bn, so the fed is only guaranteeing the $29bn after the first $1bn of losses.

of course, it's still and absolute steal for jpmorgan and moreover, it does gall more than a little bit that bear shareholders get anything at all. the entire plan is the moral equivalent of an expedited bankruptcy, so only the creditors should really get bailed out, although there is some logic in the rescuers getting some upside. but none for the owners of the effectively bankrupt entity.

besides, the fed's rationale of needing to be involved to save the financial system simply meant that they needed to keep the bank standing or otherwise keep the assets and customers properly served. bear's shareholders did NOT need to benefit in any way.


oh, and by the way, how did bear collapse? in no small part because jpmorgan (and others) refused to provide them the liquidity they needed to survive. no small degree of moral hazard for jpmorgan, who gets fat off the carcass of the competitor they helped kill.