Behind the Deal, the Hand of the Fed

A fascinating look under the hood of the bear hug JPMorgan Chase put on Bear Stearns.

In case there is any confusion about who was pulling the strings behind the scenes of JPMorgan Chase’s acquisition of Bear Stearns, the curtain was lifted Monday. By raising its bid — with the grudging approval of the Fed — to $10 a share, from $2, JPMorgan exposed what had long been whispered about but no one dared to say aloud: the Fed is officially in the deal-making business.

I don't know enough either way to disparage or nod at the comment. The writer, Andrew Ross Sorkin, seems to have good qualifications ( Mr. Sorkin began writing for The Times in 1995 under unusual circumstances: he hadn’t yet graduated from high school.).

The truth is, the Fed preferred the $2 price because of the obvious message it sent to the rest of the market, but in the end it went along with the new agreement, in part because it worried that failure of the deal might overwhelm the markets. And they got a giveback — JPMorgan is on the hook for the first $1 billion in losses.