Veering back to the story and away from Washington...

Yesterday's Wall Street Journal.


It Is Tough to Value Bear,
But It Had Better Sell Fast
By DENNIS K. BERMAN, HEIDI N. MOORE and MATTHEW KARNITSCHNIG
March 15, 2008; Page B1

(See Corrections & Amplifications item below.)

Bear Stearns Cos.' best asset may be the one where the firm resides: its 43-story Madison Avenue headquarters in New York City.

On Friday, traders and bankers inside the securities firm were glumly assessing the firm's value, which had fallen by 47% to just $3.48 billion in overall market capitalization. It was a sign of the times that much of their attention fell on their seven-year-old home, a 1.2-million-square-foot hub steps away from Grand Central Terminal. These buildings have been selling for as much as $1,000 a square foot, putting its value at $1.2 billion or more.


Value Center: Bear's headquarters in New York may be its best asset.
The focus on 383 Madison reveals just how difficult it has become to value Bear Stearns amid market upheaval. Its best hope remains a sale to J.P. Morgan Chase & Co., which extended the original lifeline Friday. The Street was abuzz that other suitors, including hedge funds and private-equity firms, may jump in, but those options still appeared to be long shots.

One participant invoked the bank run featured in the classic movie "It's a Wonderful Life." "Today is just that day at the Bailey Building & Loan. Looking at the clock, just trying to get to 4 p.m."

Both Bear and its advisers, Lazard Ltd., were moving as quickly as they could Friday, with hopes of finding a potential buyer within the next few days, according to people familiar with the matter. But to do so, they will have to untangle the question of whether to sell Bear in whole or in pieces. They will also have to assign a value for Bear all the while that its businesses are shrinking around it. Complicating matters: A credit environment that has left most other possible buyers -- from Citigroup Inc. to Lehman Brothers Holdings Inc. to Société Générale -- too worried about their own situation.

Investment banks are generally judged by their book value, which is a relatively simple accounting of assets minus liabilities. Bear's last public balance sheet was in November, and the markets don't have a good hold on where the bank stands. Bear's chief financial officer, Sam Molinaro, said on Friday's conference call that Bear's book value was worth a stock price somewhere in the $80-a-share range, a level stock investors don't agree with.

In the event of a split, Bear has four businesses that could interest buyers: the investment-banking business, which underwrites stocks, bonds and advises on mergers; the fixed-income and capital-markets businesses, which trade stocks, bonds and other securities; the clearing unit, which settles trades and also services and lends to hedge funds via a prime brokerage; and the high-net-worth group, which advises the rich on investments. The first two would have trouble attracting buyers, because of their exposure to volatile markets.

The clearing business, with the prime brokerage, would probably attract the most attention, and several bankers said it might be attractive to rivals including Morgan Stanley, Goldman Sachs Group Inc., UBS AG, J.P. Morgan Chase or Bank of New York Mellon Corp. However, the prime-brokerage business has its risks, and on a conference call today, Bear Stearns executives acknowledged that some of the business hits they have taken were because of prime brokerage.

If the firm were forced to split itself up, one banker believed it would have to be a liquidation. "They don't have enough time to do an orderly sale. That would take months. Telling people that they're selling the clearing business in a month wouldn't encourage anyone to be a counterparty now." That is why Bear Stearns's best bet is to be sold in its entirety, say a number of people working on the deal and who have advised Bear Stearns in the past.

People involved in the matter say J.P. Morgan remains the party most likely to complete a deal. The bank -- whose headquarters sits just around the corner from Bear's -- is keen to get a hold of Bear's prime-brokerage business. The clearing unit in which it resides is the only Bear business to turn a profit last year -- about $566 million on revenue of $1.2 billion. But J.P. Morgan isn't very interested in Bear's investment-banking force, say people close to the bank. In essence, if J.P. Morgan were to buy Bear, its hope would be to pay for prime brokerage, and get the rest of the company free.

Chicago hedge fund Citadel Investment Group presents an intriguing possibility, in large part because it has been trying to build out a broader infrastructure across the financial-services industry. Buying Bear Stearns would be a way for Citadel to acquire a public-stock listing, much as the New York Stock Exchange did when it bought Archipelago Holdings. Another possibility is New York private-equity firm J.C. Flowers & Co., which has built its reputation investing in troubled financial firms. Last year, it balked at completing a $25 billion purchase of student lender Sallie Mae, formally known as SLM Corp. Such a suitor might not be as acceptable to federal regulators as a larger bank.

London-based HSBC Group is perennially described as a good fit because of the lack of overlap between the two businesses: HSBC's European strength would balance Bear's strength in the U.S., where it draws more than 70% of its revenues. In addition, HSBC doesn't have a large advisory business in the U.S. to compete with Bear Stearns, and it could use Bear Stearns's valuable "high net worth," or wealth-investor, business. HSBC declined to comment. Chapter 11 remains so unappetizing that "to threaten it is almost laughable; it would be like a person holding a gun to their own head and yelling, 'Stop or I will shoot,'" said one person involved in the matter.

Bear Stearns may have trouble if it wants to sell its headquarters building quickly. The sales market for all commercial property has seized up as a result of the credit crunch. There have been few deals since SL Green Realty Corp. closed on its $1.6 billion sale-leaseback acquisition of two downtown Manhattan buildings late last year from Citigroup.

The real-estate industry has been closely watching the efforts by ailing New York developer Harry Macklowe to sell his GM building to appease his creditors. In the early round of bidding, he received offers of more than $3 billion for that property, which would be a record price paid for a single property, according to people involved in the process. But some market experts are skeptical the building will ultimately fetch such a large price in this climate.

--Jeffrey McCracken and Alex Frangos contributed to this article.

Write to Matthew Karnitschnig at matthew.karnitschnig@wsj.com

Corrections & Amplifications:

A previous version of this article said, "Buying Bear Stearns would be a way for Citadel to acquire a public-stock listing, much as the New York Stock Exchange did when it bought Euronext NV." NYSE became public by purchasing Archipelago Holdings, and later merged with Euronext NV.

Why does the Federal reserve get into deciding what company fails and what to do about it? This is ****** stupid. Kill the freaking Fed Reserve. let companies rise and fall on their own merits, not some damned bureaucrat's prognostications.

.

You are saying that Ronald Reagan balanced the budget.
It just did not happen until Clinton came into office.

You know how ridiculous that sounds.
That means that every president in the US is basically useless while
they are in office.
It is not until after their term that we see what they have accomplished.

And about the pilot.
It is completely legal to come to the united states and go to school.
Provided you do the paperwork necessary.
Ask your doctor next time you see him, he probably did it that way.
Since most of the US doctors are now coming from other countries.

And did you know over 100,000,000 that is one hundred million of your
tax dollars went into investigating Bill Clinton and Monica Lewinsky ?
While only 12 million have gone into investigating 911.
Seems a little off to me.

.

__________________

When the power of love overcomes the love of power the world will know peace.
Jimi Hendrix

Either way people will make money.

__________________
2006 CL500
2009 C300 4matic
1969 280SE
2023 Ram 1500
2007 Tiara 3200

people have a need to embrace the illusion of control -- as if a committee or person can control something as complex as the economy. Because we think we can, we think we must--another silly conceit.

B.

Yes and No.

I just started reading: Manias, Panics, and Crashes.

The point that was made in this book is that markets generally
work, but occasionally they break down and require government
intervention for the public good of stability.

The downside is that if the government steps in too often the
market is more likely to take bad risks, and need more Gov help.
Positive feedback.

__________________
cult plus time equals religion

I agree with that. A little correction is healthy for the markets now and then, it reigns in bad investing.

__________________
2006 CL500
2009 C300 4matic
1969 280SE
2023 Ram 1500
2007 Tiara 3200

Gotta agree with that.

Its much bigger than you know.........

__________________
Matt (SD,CA)

1984 300SD.. White/Chrome Bunts..Green

1997 2500 Dodge Ram 5.9 Cummins 12 Valve 36 PSI of Boost = 400+hp & 800+tQ .. ..Greenspeed

2004 Dodge Ram 2500 4x4 Quad Cab Cummins 5.9 H.O "596hp/1225tq" 6 spd. Man. Leather Heated seats/Loaded..Flame Red....GREENSPEED

Global warming...Doing my part, Smokin da hippies..

Fight the good fight!......

I'm a little worried that some mysterious billion dollar hedge funds are at the bottom of this. I don't fully understand hedge funds, but I know it's where the super wealthy and connected put their cash to get astounding 'sure-fire' returns during the stock market climb.

__________________
1985 380SE Blue/Blue - 230,000 miles
2012 Subaru Forester 5-speed
2005 Toyota Sienna
2004 Chrysler Sebring convertible
1999 Toyota Tacoma

__________________
Matt (SD,CA)

1984 300SD.. White/Chrome Bunts..Green

1997 2500 Dodge Ram 5.9 Cummins 12 Valve 36 PSI of Boost = 400+hp & 800+tQ .. ..Greenspeed

2004 Dodge Ram 2500 4x4 Quad Cab Cummins 5.9 H.O "596hp/1225tq" 6 spd. Man. Leather Heated seats/Loaded..Flame Red....GREENSPEED

Global warming...Doing my part, Smokin da hippies..

Fight the good fight!......

At that level you get to play by a different set of rules.

For example you can invest in IPO's. I was watching a show on Netscape, and one of the original investors gave them $5m to get them going. When they went public and everything was said and done that $5m turned into just under $2B.

I'd kill to go back in time and write Google a nice check when they were working out of a garage...or better yet the next Google...

__________________
2006 CL500
2009 C300 4matic
1969 280SE
2023 Ram 1500
2007 Tiara 3200

Apparently Bears lofty assets were valued at $2 per share. JP Morgan just bought them and the Fed lowered fed funds rate 1/4 point to 3.25%.

Gonna be a fun day on the markets on Monday.

__________________
Terry Allison
N. Calif. & Boca Chica, Panama

09' E320 Bluetec 77k (USA)
09' Hyundai Santa Fe Diesel 48k (S.A.)

JPMorgan to buy ailing Bear Stearns for $2 a share
Associated Press


Sunday, March 16, 2008

NEW YORK — JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2-million (U.S.), a stunning collapse for one of the world's largest and most venerable investment banks.

JPMorgan Chase & Co. said the $2 a share, all-stock deal has received the required approvals from the federal government and the Federal Reserve. Bear Stearns shares closed Friday at $30 a share.

The Fed will provide special financing to JPMorgan Chase for the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30-billion of Bear Stearns's less liquid assets.

At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 per cent from 3.50 per cent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 per cent.

__________________
Jason Priest
1999 E430
1995 E420 - retired
1986 420SEL - retired

Wow JP Morgan got a heck of a deal!

__________________
2006 CL500
2009 C300 4matic
1969 280SE
2023 Ram 1500
2007 Tiara 3200