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New York (HedgeCo.Net) – Alan Schwartz may be having second thoughts about his new position at JPMorgan Chase, reports the New York Post. According to the paper, the former Bear Stearns CEO is contemplating JPMorgan’s offer for a non-executive vice chairman position.
It is still unclear as to why. Some believe Schwartz feels uneasy about the fact that over half of Bear’s employees are without a job, while some say that JPMorgan may not be aggressive enough in their pursuit, having Jimmy Lee already on the payroll.
According to a filing with the SEC, JPMorgan asserted that Schwartz, along with other fellow senior officials may eventually come on board with them. This included Bear CFO Sam Molinaro and Controller Jeffrey Farber.
Alan Schwartz was CEO of Bear Stearns for only three months before the fire sale to JPMorgan backed by the Federal Reserve. Prior to its demise, Schwartz ensured weary investors that Bear’s “liquidity cushion” could handle the losses that were rocking them.
Schwartz will supposedly reveal his decision once he sees how the bank performs post buyout. The Bear-JPMorgan deal was finalized on Friday.
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Financial Times – Jimmy Cayne apologised for the first time to Bear Stearns shareholders and employees on Thursday as the investment bank he helped build into a scrappy powerhouse formally disappeared into Wall Street history as the biggest victim of the credit crisis.
Mr Cayne’s comments, made before a packed auditorium at Bear headquarters, came as shareholders approved the sale of the bank to JPMorgan Chase for $10 a share, or $2.2bn. Bear traded above $150 a share as recently as a year ago.
“I just want to personally apologise for what has happened,” Mr Cayne, 74, said at a meeting that lasted less than 10 minutes. “We just ran into our own hurricane.”
He was referring to a crisis of confidence that slammed Bear in March, leading clients to flee and lenders to pull the overnight funding on which the bank had become so dependent.
The crisis pushed Bear to the brink of bankruptcy before the Federal Reserve and other regulators stepped in to help broker the sale to JPMorgan for an initial price of $2 per share. JPMorgan later lifted the offer to $10 after an outcry from Bear shareholders.
Bear employees and shareholders on Thursday were not sympathetic to the run-on-the-bank argument, contending that the company could have moved sooner to raise capital and reduce its reliance on borrowed money.
“This did not need to happen and a lot of people lost all they had,” said one Bear trader, smoking a cigarette on the street after the meeting ended.
The trader, who declined to give his name, said he was happy to still have his job even as JPMorgan cuts the vast bulk of Bear‘s former workforce of 14,000. “Maybe they will come in here and really clean this place up,” he said.
Reuters- Sovereign wealth funds, which control up to $3.7 trillion in assets and have been making headlines as they buy assets in the West, will ultimately have the biggest impact on private equity and hedge funds, analysts at JPMorgan Chase said in a report on Thursday.
State-run investment funds currently own up to 7.5 percent of so-called alternative assets, or about $340 billion, and this stake could grow to as high as 17 percent by the end of 2012, said David Fernandez and Bernhard Eschweiler, analysts at the bank. "The main beneficiaries of the increased allocation by SWFs to alternatives are set to be private equity firms and hedge funds. These managers offer skills, resources and expertise that would be difficult for most SWFs to develop on their own," they said in the report. Indeed, last year one of the highest profile deals among sovereign wealth funds was the China Investment Co Ltd’s purchase of a $3 billion stake in U.S. private equity firm The Blackstone Group.
Bloomberg – It’s Friday, March 14, and hedge fund adviser Tim Backshall is trying to stave off panic. Backshall sits in the Walnut Creek, California, office of his firm, Credit Derivatives Research LLC, at a U-shaped desk dominated by five computer monitors.
Bear Stearns Cos. shares have plunged 50 percent since trading began today, and his fund manager clients, some of whom have their cash and other accounts at Bear, worry that the bank is on the verge of bankruptcy. They’re unsure whether they should protect their assets by purchasing credit-default swaps, a type of insurance that’s supposed to pay them face value if Bear’s debt goes under.
Backshall, 37, tells them there are two rubs: The price of the swaps is skyrocketing by the minute, and the banks selling the insurance are also at risk of collapsing. If Bear goes down, he tells them, it may take other banks with it.
“There’s always the danger the bank selling you the protection on Bear will fail,” Backshall says. If that were to happen, his clients could spend millions of dollars for worthless insurance.
Investors can’t tell whether the people selling the swaps — known as counterparties — have the money to honor their promises, Backshall says between phone calls.
“It’s clearly a combination of absolute fear and investors really not knowing,” he says.
On this day, a CDS-market meltdown doesn’t happen. In a frenzy of weekend activity, the Federal Reserve and JPMorgan Chase & Co. rescue Bear Stearns from bankruptcy — removing the need for the sellers of credit-default protection to pay up on their contracts.
