On Sunday evening New York time, JPMorgan Chase (jpm) announced it will acquire rival Bear Stearns (bsc) in a deal that is worth $236.2 million, or $2 a share. This is an unbelievable turn of events for Bear Stearns, one of the world’s largest investment firms. JPMorgan’s acquisition of Bear Stearns represents around a shocking 1% of what the investment bank was worth just 16 days ago. $2 per share? That is almost worthless, considering Bear Stearns stocks ended last Friday at $30 a share. Their stocks peaked at $159.36 in January 2007. People, mutual funds and financial institutions who have invested in Bear stocks will see their money evaporate as the JPMorgan deal gives pennies to the dollar. This buyout needed to be completed before financial markets open on Monday so as to prevent a Bear Stearns bankruptcy and a massive meltdown in the global financial system. This all-stock deal was approved by the Fed and the US government.

At almost the same time as this news was made public, the Fed announced it has cut the discount rate it charges on direct loans to banks and announced a new program to lend directly to Wall Street dealers.

While the US and European stock markets are still closed, Asian stocks are suffering from these two announcements. Hong Kong’s Hang Seng (^hsi) fell almost 5%; Japan’s Nikkei 225 Average (^n225) fell almost 3% and Singapore’s Straits Times Index (^sti) fell 2%.

Lehman Brothers (leh) and Goldman Sachs (gs) will report earnings on Tuesday, followed by Morgan Stanley (ms) on Wednesday.

Posted in Categories: Economy, Stocks.

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