The Ben Behind Bear’s Curtain

450px-Wizard_of_oz_5.jpgIn the new Bear deal, as Steven Davidoff points out,

“Delaware law at this point seems largely irrelevant to JPMorgan and Wachtell Lipton Rosen & Katz. This is a deal that they appear to think they can force through the Delaware courts based on its extraordinary posture.”

You might ask yourself (and I have) what justifies this extraordinarily level of chutzpah and brinkmanship with the DE courts. The answer seems to to be Ben Bernake’s hidden hand. We now know, for instance, that the laughably low $2 original merger price was limited at the Fed’s insistence. Why? You might think the deal’s pricing had something to do with fundamental values, or risk-adjusted-return, or even the fed’s worry about taking on bad debt. Nope. It was the optics:

“As part of the original deal, the Fed guaranteed to take on $30 billion of Bear’s most toxic assets. The central bank also directed JPMorgan to pay no more than $2 a share for Bear to assure that it would not appear that the Bear shareholders were being rescued, according to people involved in the negotiations.”

Well, that worked out well.

(Image Source: Wikicommons, “An illustration by W. W. Denslow from The Wonderful Wizard of Oz, also known as The Wizard of Oz, a 1900 children’s novel by L. Frank Baum.”)

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