Monday, March 17, 2008

A Floor Wax And A Dessert Topping

JMM on why the Fed could "make" Bear sell at a price which some think is actually a bit on the cheap side.

One, that Bear Stearns execs were unwilling to go into bankruptcy because of a various forms of criminal liability they would face -- and that everyone would be so pissed about the collateral damage of the bank's collapse that everyone would want to not only execute them but also have them drawn and quartered (in case you only know the phrase and not what it actually means: not pretty). Two, there's so much crap on Bear Stearns' books that $2 per share is just a fair price, even with the Fed assuming a lot of the potential liability.

I'd say it's probably a bit of both. The execs just want to wash their hands and run away before it comes out just how bad they screwed things up (whether criminal acts or not), and they did screw up so much that Bear really wasn't worth all that much, especially if they did just collapse and start bringing down other bits of the system with them.