JP Morgan now pays five-fold for Bear

While only a week ago the market was alive with chatter that the liquidity crunch would claim an even more spectacular victim than Bear Stearns (the fifth largest investment bank in the US), sentiment has shifted sufficiently over recent days for JP Morgan to concede to the pressure from unhappy shareholders of Bear.

JP Morgan will now offer to pay five times as much, or US$10 a share, for the struggling investment bank.  JP Morgan had only a week or so ago, in a financial rescue engineered with the help of the US Federal Reserve, offered to pay $US2 a share for Bear Stearns.

And now the rescue package from the Fed is not quite as generous. JP Morgan must bear the first US$1 billion in losses on the US$30 billion funding line (if there are any losses) and any gains will accrue to the Fed.