Monday, March 24, 2008

Seeking Liquidity

I think we’re all learning a lot from the Bear Stearns (BSC) thing. Sorry, I know writers are supposed to avoid vague words like "thing," but Fed Chairman Bernanke hates the term "bailout" and I don’t want to increase the poor guy's stress level. So even though Jamie Dimon is slotted to get the Manhattan skyscraper while we taxpayers effectively acquire a basement full of illiquid mortgage-backed securities, I will steer clear of the B-word and just call it a thing instead. Thingy, if you prefer.

Here’s what I myself have learned so far. First, I've learned that, according to the Fed, the Bear deal isn’t a thingy if JP Morgan (JPM) pays 2 bucks a share for stock that recently traded at 67, but it might be a thingy if it pays 10. And even more importantly, I’ve found out that folks at well-paid legal powerhouse Wachtell, Lipton can make mistakes-- like the one in the JPMorgan/Bear merger agreement (thank you, New York Times) that says JPM will stand behind Bear’s trades even if shareholders reject the deal. Not to mention someone spelled the word "dependent" with an "ant," which always bugs me.

There’s another clause in the merger agreement that kind of jumped out at me. (Yes, I confess to actually sort of reading the document, but I was watching The Simpsons at the same time so it doesn't count.) I’m talking about the sentence that says JPM will "honor" all of Bear’s employment agreements, change in control agreements and deferred compensation plans. According to Bear’s last proxy, the only CIC arrangements its officers have are equity-linked, and therefore perhaps nothing to get excited about. Still, the promise to love, honor and obey Bear's CIC deals made it into the contract, and covers any commitments to Bear employees or officers, "written or unwritten." So we citizens of Bailout Nation (damn, that just slipped out) may want to keep an eye on who at Bear walks out with what, just in case.

Back in 2006, the Wall Street Journal reported that some were referring to Mr. Bernanke as "Bearnanke" because of his views on the bond market. The label didn’t stick at the time, though it may now, for a different reason.

I say the hardworking Chairman deserves a nickname that’s more fun, some kind of fratboy moniker completely incongruous with his beard-sporting appearance and somber demeanor. So best of luck with the Bear thing, "BB Gun." The next beer I chug will be for you.

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