Bear Stearns acquired by JPMorgan Chase for $240 million

by Gill Montia

Story link: Bear Stearns acquired by JPMorgan Chase for $240 million

Wall Street investment bank, Bear Stearns, has been acquired by JPMorgan Chase, for just $240 million.

The chief executive of JP Morgan Chase, Jamie Dimon, has confirmed that his bank is to acquire Bear Stearns for $2 a share. On Friday of last week shares in Bear Stearns had closed at $30 each, having lost half their value during the day.

The all share transaction is being supported by the US Federal Reserve which is in effect underwriting $30 billion worth of Bear Stearn’s mortgage-backed assets.

The central bank has also announced a series of measures aimed at easing the credit crisis.

It has cut the rate at which it lends to bank from 3.5% to 3.25%, which should help ensure profitability in the US banking sector.

The central bank is also making short-tem loans available on favourable terms to large financial institutions.

Analysts now expect the Federal Reserve to cut to the main borrowing rate by 0.75% this week.

Last week, investors in Bear Stearns lost confidence in the value of the bank’s assets and began to demand their money back. Had the bank been forced into administration the global money markets could have seized up altogether, with banks too nervous to lend to one another.