Bear Stearns is Gone, But Crisis Remains

The company said beginning now it is guaranteeing Bear Stearns' trading obligations, a move that would also be seen as an attempt to stop the run on customer money.

"JPMorgan Chase stands behind Bear Stearns," said Jamie Dimon, JPMorgan's chief executive officer. "Bear Stearns' clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns' counterparty risk."

It's not clear just how much remains of Bear Stearns for JPMorgan to acquire. In addition to a large fixed-income operation that has been hammered by the credit-market turmoil, Bear Stearns' most attractive asset would be its prime brokerage operations, which cater to the trading and assorted other needs of hedge funds. Much of the run last week is believed to have been in the prime brokerage division, with hedge fund clients pulling cash out.

Dimon has built a reputation as being less willing to go whole hog in a business than some of his peers, and as such JPMorgan has not had the magnitude of problems as its fellow banks and broker-dealers as the credit crunch works its way through the market. That made JPMorgan perhaps more capable than other banks of pulling off a rescue, or salvage, of Bear Stearns.

"We are taking reasonable risk, we have built in an appropriate margin for error, it strengthens our business, and we have a clear ability to execute," Dimon said Sunday.

In his own statement Sunday, Schwartz of Bear said, "The past week has been an incredibly difficult time for Bear Stearns. This transaction represents the best outcome for all of our constituencies based upon the current circumstances."

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