Today the JPMorgan Chase takeover of Bear Stearns for $2 a share entered the realm of the too-good-to-be-true (alongside the takeover of Iraq), as Jamie Dimon increased his bid for the imploding investment bank to $10 a share. Our prediction: The deal is going to go through at this price. It’s a shame, really, that the inside game on Wall Street is so rigged that even the worst gamblers are not forced to leave the table with their wallets empty. Individual bankers may complain that they were not responsible for the company’s implosion, but who ever said it was a line worker’s fault that 50,000 people had to be laid off from General Motors? Wall Street, obviously, can’t take a taste of its own bitter medicine.
There’s a nice conspiratorial wrinkle in today’s coverage, in which the New York Times’ Andrew Ross Sorkin suggests JPMorgan was had by the fools at Bear Stearns just as Dimon & Co. thought they were taking them for all they were worth, due to “inadvertently included” contract language that left JPMorgan on the hook for Bear Stearns’s liabilities, whether the deal went through or not. Don’t believe it. The powers-that-be — the Fed, JPMorgan, every other CEO on Wall Street — are petrified that this thing could turn really ugly, and it looks like Dimon did the smart thing and anted up another $750 million or so just to stop that from happening.
In other words, the deal is going to go through, one way or the other. If it doesn’t, the market craters, and Dimon is stepping in to make sure Bear Stearn’s shareholders don’t send the company into bankruptcy in a fit of pique. Good on him for it. As we spelled out in this week’s New York cover story, the man is risk-averse. So think of it this way: At the same time he’s saving his own skin, he might even be saving yours. —Duff McDonald