In today's testimony in front of the Senate Banking Committee, investors got a behind the scenes glimpse of what really happened over St. Patrick's Day weekend when Jamie Dimon and JP Morgan had the "luck of the Irish" on their side and acquired Bear Stearns for $2 per share.
In his own words, Dimon told Senators that JP Morgan took on considerable risk in acquiring Bear Stearns, and that without the lending facility that was put in place, JP Morgan "could not and would not have assumed the substantial risks of acquiring Bear Stearns." He added that the Fed's facility was not a way for JP Morgan to dump the bad assets on to the Fed when he testified that, "We kept the riskier and more-complex securities in the Bear Stearns portfolio for our own account. We did not cherry-pick the assets in the collateral pool.'' Finally, Dimon maintained that if JP Morgan had not stepped in to rescue Bear Stearns, the consequences would have been 'disastrous', and not just for Wall Street. The effects would have been felt by "...people all over America -- union members, retirees, small-business owners, and our parents and children..."
While it's easy to look back now and say that JP Morgan had the steal of the century, hindsight is always twenty-twenty. No one really knows how stressful things were behind the scenes. That being said though, judging by the company's recent actions, it appears as though JP Morgan knows what a great deal it got. One week after announcing its deal with Bear Stearns, JP Morgan announced on March 24th that it would increase its bid by 400% to $10 per share.
Tonight, we got even more information as to how badly JP Morgan wants this deal to get done. In a filing after the close on Thursday, JP Morgan disclosed that it purchased 11 million shares of BSC stock at a price of $12.24 per share in the open market just minutes after agreeing to buy the company for $10 per share. Additionally, they also stated that they plan to keep buying shares on the open market until they acquire 49.5% of the company. They always say actions speak louder than words, and based on these actions, one would have to assume that JP Morgan thinks the benefits of acquiring Bear Stearns even at the $12 level are well worth the risk.