Bear Stearns is Gone, But Crisis Remains

Investors around the world are waking up to a disquieting series of events on Monday, following an astonishing weekend of activity in the United States. Bear Stearns will be bought for a song by JPMorgan Chase, a result of its mortgage-related problems, and the Federal Reserve undertook a rare Sunday interest-rate cut.

JPMorgan Chase, which on Friday rode to the rescue of the benighted Bear Stearns , bought the firm on Sunday at a fire-sale price of $2 a share, or $236.2 million. At the end of last week's trading, Bear was worth $3.5 billion; one day earlier $6.7 billion.

The move, if not the price, was widely expected after JPMorgan stepped in Friday to shore up Bear Stearns, which was reeling from a customer run on their money. The deal makes Bank of America's $4 billion acquisition of Countrywide Financial, another troubled lender, look lavish in comparison.

The boards of both firms unanimously approved the deal. JPMorgan had one and a half days to look over the Bear Stearns books. That the Bear Stearns board, which presumably was more familiar with its finances, would part with the company for so little money indicates it felt it couldn't wait any longer without the risk of getting even less.

The news got out before the opening of markets in Asia, when Bear Stearns might have been forced to divest hard-to-sell assets at painful discounts if it was trying to stay in business. Asian markets opened sharply lower on Monday, following Friday's decline in New York, which was sparked in part by the situation at Bear Stearns. In Tokyo, the Nikkei 225-stock index was 4% lower, while the Hang Seng index in Hong Kong was 5% lower and Standard & Poor's 500 futures were trading down 3%, according to TradeTheNews.com.