2-Dollar Broker

$2/share is the price J.P. Morgan is paying for Bear Stearns. That’s down from $30/share as of Friday’s close.

To a first approximation, from the perspective of shareholders and employees, $2/share is the equivalent of zero. The prime brokerage business alone was probably worth about ten times that amount. That could mean that J.P. Morgan thinks the cost of exiting the other businesses (because it fears some proportion of Bear’s assets are marked incorrectly, or because it just costs money to eliminate redundancies and there’s a lot of overlap in investment banking and asset management) is roughly equivalent to the value of the prime brokerage (and anything else they intend to keep). Or it means that Bear’s board had sufficiently limited leverage that it had to take literally any offer above zero. Or, most likely, both.

I’m really trying to figure out the silver lining here. I guess it’s that we don’t have to worry about the contagion from a spectacular Bear Stearns bankruptcy, and the potential chaos that would bring to the derivatives markets as counterparties rushed to replace positions previously facing Bear. Beyond that, I’m hard pressed. $2 won’t even get you on the subway for much longer.