JPMorgan acquires troubled Bear

JPMorgan completes deal to acquire foundering Wall Street brokerage and stave off wider chaos in financial markets.

JPMorgan Chase & Co. said Sunday that it would acquire troubled Wall Street firm Bear Stearns amid deepening fears that Bear's demise could have sent shockwaves across the already shaky financial markets.

The deal values Bear Stearns at $236 million, or just $2 a share - shares had closed at $30 on Friday, down 47% that day.

JPMorgan is taking immediate responsibility for Bear's trading obligations and assuming "management oversight" of the firm's operations. The deal is subject to approval by shareholders but has already been approved by the Federal Reserve and other regulators, according to a statement released by JPMorgan. The Fed is providing special emergency financing for up to $30 billion in Bear Stearns (BSC, Fortune 500) assets.

With the global credit crisis worsening, the Fed - along with officials from the Treasury Department - has been taking dramatic action to help banks and prevent widespread panic through the financial markets.

"JPMorgan stands behind Bear Stearns," said Jamie Dimon, chairman and chief executive of JPMorgan. "Bear Stearns clients and counterparties should feel secure that JPMorgan is guaranteeing ... risk," he continued.

Bear Stearns was on the brink of financial collapse Friday when JPMorgan and the Federal Reserve Bank of New York said they would provide the brokerage a short-term loan. Bear was dealing with a classic run-on-the-bank: The firm's short-term creditors refused to lend the firm any more money and simultaneously demanded repayment of outstanding debt. The one-two punch overwhelmed Bear's cash position.

Treasury Secretary Henry Paulson said on Sunday that talks about how to rescue Bear had continued throughout the weekend. He defended the Fed's bailout on Friday as "the right decision" and said the Bush administration was ready to take other actions to bring stability to the financial markets.

The fast-track deal is expected to close by the end of June, the statement said.

Bear Stearns has approximately 14,000 employees worldwide.

A deep, fast fall

The deal marks an inglorious chapter for 85-year-old Bear Stearns, a storied Wall Street firm whose unraveling has been fast and furious.

Rumors that Bear Stearns was on the verge of collapse started buzzing around Wall Street trading desks last Monday. Chief Executive Alan Schwartz - who took over as CEO in early January from longtime chief Jimmy Cayne - appeared on television on Wednesday afternoon to reassure the markets that the firm was stable.

But by Thursday night, Bear was in a severe crunch. Some firms that trade with it effectively stopped offering it credit because they feared that Bear was running short of short-term funding, or liquidity.

Shares of Bear Stearns opened last week at $69.75 and traded as high as $159 last year.