Bear Stearns, the fifth largest investment firm in the United States, was in danger of collapsing. The government stepped in to prevent a total collapse and to ensure the orderly function of the financial markets.

JPMorgan Chase was permitted to acquire Bear Stearns for $2 per share, or $236 million, which was less than 90% of the company’s value on Friday.

U.S. Treasury Secretary Henry Paulson on Monday defended government moves to rescue Bear Stearns Cos Inc (BSC.N) from bankruptcy, saying it was important to ensure the orderly function of financial markets.

Speaking to reporters following a White House meeting between President George W. Bush and his economic advisers, Paulson said those worried about the government rescue creating a “moral hazard” should keep in mind that Bear Stearns (BSC.N) shareholders face considerable losses with the sale of the investment firm to JPMorgan Chase (JPM.N) for $2 a share.

There’s something amiss when the fifth largest investment firm in our nation is only worth $236 million, yet just last month, the Yahoo board of directors refused to entertain Microsoft’s $44.6 billion offer.

That puts the value of Bear Stearns at 1/2 of 1 percent of the value of Yahoo (based on the amount of Microsoft’s offer). Yet, if they were allowed to collapse the demise of the investment firm would have had a ripple effect on thousands of businesses across the nation and it would have destroyed much of our economy.

That’s an awful lot of power for one investment firm, if you ask me, and now JPMorgan Chase, already the third largest banking institution in the United States, wields more of that power.

– Powered By Stuffr! –

Comments are closed.