Dan Geer is fond of saying that financial risk management works
because everyone knows who owns what risks.
Reports are that JPMorgan just bought Bear Stearns for $236MM, a 93% discount to Friday’s closing price, with $30BB of US taxpayer money thrown in (as guarantees) for good measure. Bloomberg also reports that the Bear Stearns headquaters are valued at $1.2 BB, which means that the firm’s net market positions are a liability of about ($31BB).
Apparently, Bear Stearns owned less of the risk than the Fed. I
wonder when the Fed knew that? According to the same New York Times story, Bear Stearns has known it all along:
Even up until last week, Alan “Ace” Greenberg, Bear Stearn’s chairman for more than 20 years and a champion bridge player, still regaled its partners over lengthy lunches about gambling with the firm’s money in its wood-paneled dining room.
The firm’s money, indeed.