Senators Investigate the Credit ‘Crisis’

Senators Investigate the Credit ‘Crisis’

Bear Stearns – JPMorgan Chase Deal under a Microscope
April 03, 2008

Washington, D.C., April
3, 2008—Today, federal officials and the CEOs of Bear Stearns and JPMorgan
Chase will testify before the Senate Banking Committee on recent turmoil in U.S. credit
markets.

John Berlau, Director of the Competitive Enterprise Institute's
Center for Entrepreneurship, argues
that the bailout of Bear Stearns’ creditors and forced fire sale to JPMorgan
Chase was unfair to both taxpayers and Bear Stearns shareholders. He makes the
case that the Federal Reserve should withdraw its backing of the
deal, and let shareholders entertain bids from other firms to acquire the
company.

Berlau recently assessed
the deal in an op-ed for Investor's
Business Daily.

"The deal is lousy not because of the share price
offered — although $10 a share still may be chump change for a company selling
for $30 just before the deal was announced a week ago and more than $80 at the
beginning of the year.

"Bear's officially stated book value is also $84 per
share. Perhaps that is too high, but even if the book value were half that, $40
is still four times higher than the $10 that Morgan plans to pay shareholders.

"But the real reason the deal is so flawed is the
unprecedented government-sanctioned breach in corporate governance practices.
Shareholders, the true owners of the company, are being denied a voice in the
fate of the firm."

Read the full
op-ed here.

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