Transcripts

JPMorgan Ups the Ante For Bear Stearns

SUSIE GHARIB: Shares of Bear Stearns surged 76 percent today, as JPMorgan Chase sweetened its bid for the debilitated investment firm. The revised offer now stands at $10 a share. In return, Bear Stearns has agreed to sell JPMorgan newly issued shares, giving it a 39.5 percent stake. New York bureau chief Scott Gurvey takes a closer look at the new terms of the takeover.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Some see it as a windfall for Bear Stearns shareholders. Others say JPMorgan's decision to quintuple its offering price just makes the fire sale a little less hot. JPMorgan is now offering $10 a share for Bear, up from its $2 offer of a week ago. The deal now appears to value Bear at $1.2 billion, up from the original offer of $236 million. JPMorgan CEO Jamie Dimon spent much of last week under attack from Bear shareholders and employees angry at the price. JPMorgan says the former head of Vanguard, Jack Bogle, must have concluded the deal would not be approved.

JACK BOGLE, FORMER CEO, VANGUARD GROUP: I imagine they concluded, because Jamie Dimon is a very tough negotiator, he didn't have any recourse but to raise his offer. You know, they are in the process of needing to get a majority shareholder vote and so he must have figured that it was in his interest to sweeten up that offer a good bit.

GURVEY: The Federal Reserve will still assume control of $30 billion in Bear assets, but JPMorgan will be on the hook for the first $1 billion of any losses. Market watchers say the sweetened deal reduces uncertainty about Bear. Scott Sprinzen of Standard & Poor's says the Fed's decision to open the discount window to investment banks should relieve pressure on the entire sector.

SCOTT SPRINZEN, CREDIT ANALYST, STANDARD AND POOR'S: It's a positive, no question. It affords a safety net to these companies that didn't exist before. But it's not an unlimited program. There are only certain asset types that can be borrowed against under the terms of the program and, also, it's not a program that the Fed has said it's committed to indefinitely.

GURVEY: But not every investor is satisfied. Jack Bogle sees a double standard.

BOGLE: It is to me remarkable that all these capitalists who say just keep the government out of the way and we'll do fine are the first ones in line when they're coming to search for help -- you know, go to the government whenever you get in trouble. And so I'm deeply troubled by the conflict between those two kind of polar positions.

GURVEY: Bogle says it is time to revive the Glass-Steagall act of 1933, which separated commercial banks from investment banks. That law was repealed in 1999. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.