Finance Giant Goes for Peanuts

The mortgage crisis has claimed another corporate victim. Bear Stearns, one of the largest financial institutions in the world, has been bought for a piddling $236 million. The company was valued at $3.5 billion just a few days ago, and $20 billion a little more than a year ago.

The firm’s sale was enabled by a loan from the Federal Reserve that could add up to $30 billion.

Wall Street Journal:

Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed—after prodding by the federal government—to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million.

Bear Stearns had a stock-market value of about $3.5 billion as of Friday—and was worth $20 billion in January 2007. But the crisis of confidence that swept the firm and fueled a customer exodus in recent days left Bear Stearns with a horrible choice: sell the firm—at any price—to a big bank willing to assume its trading obligations or file for bankruptcy.

“At the end of the day, what Bear Stearns was looking at was either taking $2 a share or going bust,” said one person involved in the negotiations. “Those were the only options.”

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