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A Fire Sale On Wall Street

Tuesday, March 18, 2008

WINNERS

J.P. Morgan Chase: The company agreed to acquire Bear Stearns for a bargain-basement price of $2 a share, or about $236 million, a small fraction of Bear's Nov. 30 value of $13.6 billion. The Federal Reserve agreed to assume the risk for $30 billion worth of Bear Stearns's dodgy investments, allowing J.P. Morgan to keep them off its balance sheet, though the company is also taking on Bear's liabilities and the risk of legal action against Bear.

J.P. Morgan shareholders: Shares in J.P. Morgan rose more than 10 percent yesterday, to $40.31.

Consumers: The deal averts a possible meltdown in the credit markets, which could have paralyzed the financial system, imperiling everything from home loans to credit card rates.

LOSERS

Bear Stearns: The 85-year-old firm was crippled by a cash crunch as fearful clients flooded the bank to withdraw money and investors refused to lend the firm money. Faced with a growing liquidity crisis, the firm decided it had no choice but to be sold.

Bear Stearns shareholders: Shares in the company, which peaked at $171.51 in January last year, closed at $4.81 yesterday. This massive slide in value means huge losses for Bear Stearns's major shareholders -- including some of its executives -- as well as its employees, who own about one-third of the company's stock.

Money management firm Barrow Hanley

Stock value on Dec. 31, 2007

$1.013 billion

March 17

$55 million

Loss in value

-$958 million

Billionaire investor Joseph Lewis

Stock value on Dec. 31, 2007

$975 million

March 17

$53 million

Loss in value

-$922 million

Investment bank Morgan Stanley

Stock value on Dec. 31, 2007

$559 million

March 17

$30 million

Loss in value

-$529 million

Bear Stearns Chairman James E. Cayne

Stock value on Dec. 31, 2007

$515 million

March 17

$28 million

Loss in value

-$487 million

Bear Stearns chief executive Alan Schwartz

Stock value on Dec. 31, 2007

$91 million

March 17

$5 million

Loss in value

-$86 million

American taxpayers?: If Bear's $30 billion in complicated securities goes bad, the Fed, and ultimately U.S. taxpayers, are on the hook.

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