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Jpmorgan
Jpmorgan
BS didnt have access to the Federal Reserve discount window and was solely
dependent upon the market liquidity and funding.
BS activities were financed with a mix of long-term debt and equity. The bank
was also using overnight REPOs to support the trading business and those
repos were collateralized from Bears inventory. Securities represented 35%
of total assets. (138$ billion)
And their main source of financing were in form of deposits and combination
of repos and borrowings in the federal funds market, a market in which
commercial banks land to each other. Also the Bears protection was based
on the its credit-worthiness and on the quality of the underlying assets that
secured the REPOs. (Risk-free, treasury sec and MBS)
6. How would the Bears value be affected with the potential bankruptcy?
Bankruptcy would have a negative effect:
When a firm is on the verge of bankruptcy, its stock value will reflect the
risk (value is composed of the potential income that shareholders may
receive after liquidation and a premium based on the possibility that the firm
may restructure and begin to operate successfully in the future). The main
principle of bankruptcy is that it erases debt
7. What price would you pay for Bears ongoing business?
Only Bears brand new skyscraper, across the street from J.P. Morgan in
midtown Manhattan, was worth $1.2 billion alone and Bear Stearns's prime
brokerage unit, which provides loans and processes trades for hedge funds,
generated $1.2 billion in revenue last year.