Bear Stearns, the investment bank that nearly collapsed last month, is the subject of another lawsuit.  This time, liquidators of two Bear Stearns’ hedge funds that failed last year are accusing the company of concealing that the two funds were “never designed to withstand even a slight downtick in the housing market.'’  Bear Stearns is in the process of being acquired by JPMorgan Chase & Co, a transaction made possible by a massive bailout engineered by the Federal Reserve.

Before its near-collapse, Bear Stearns was once one of the biggest investment banks on Wall Street. But  two of its hedge funds, heavily invested in subprime mortgages, folded in July. Bear’s investors became increasingly reluctant to do business with the company. Despite the company’s assurances that it had plenty of cash on hand to continue operations, the company was near to filing bankruptcy until the JPMorgan deal was struck.  JPMorgan is purchasing Bear Stearns for $10 a share, or roughly $2.4 billion - a fraction of what the stock was worth just before the bank’s collapse.  The sale is backed by  $30 billion  non-recourse funding provided by the Federal Reserve to JPMorgan.  Non-recourse funding means that if the collateral goes bad, the Fed can’t come after JP Morgan for other assets.  In the end, taxpayers could be on the hook for the Bear Stearns debacle. (more…)

The Federal Trade Commission (FTC) is the latest federal agency investigating doomed investment bank Bear Stearns.  According to a recent filing with the Securities and Exchange Commission (SEC), Bear Stearns Cos’ EMC Mortgage Corp unit has received a notice from the FTC that it may have violated laws regarding its servicing activities.

Bear Stearns, once the fifth-largest U.S. investment bank, faced a run on the bank in March and was forced to sell itself to JPMorgan Chase & Co.   Two of its hedge funds, heavily invested in subprime mortgages, folded in July. Bear’s investors became increasingly reluctant to do business with the company. Despite the company’s assurances that it had plenty of cash on hand to continue operations, it collapsed  last month. (more…)

Investors in auction rate securities have filed  lawsuits against Morgan Stanley and Merrill Lynch, alleging those brokerages deceptively marketed the investment vehicles and took actions that made auction rate securities all-but-impossible to sell.  Both lawsuits, filed in federal court in Manhattan, are seeking class action status.

Auction rate securities are long-term corporate bonds, municipal bonds and preferred stock on which the interest rates are reset periodically based on bids submitted through securities firms. Generally, rates are reset every  seven, 14, 28 or 35 days. Because they can be sold during weekly or monthly auctions, banks and brokerages often touted auction rate securities as short-term investments or cash equivalents.   (more…)

Bear Stearns, the investment bank recently rescued by a massive bailout engineered by the Federal Reserve, hasn’t seen the end of its troubles.  Already facing lawsuits by angry shareholders and employees whose stock in the company is worth far less than it was two weeks ago, Bear Stearns could also soon be subject of a probe by the Securities and Exchange Commission (SEC).  According to the Associated Press, securities regulators have not ruled out legal action over potentially misleading comments about Bear Stearns’ financial health made days before JP Morgan arranged to buy the investment bank.

Bear Stearns was once one of the biggest investment banks on Wall Street before being acquired by JP Morgan Chase over the weekend in an effort to salvage the failing institution.  Two of its hedge funds, heavily invested in subprime mortgages, folded in July. Bear’s investors became increasingly reluctant to do business with the company. Despite the company’s assurances that it had plenty of cash on hand to continue operations, it collapsed  last Friday. (more…)

Bear Stearns, once one of the biggest investment banks on Wall Street, was acquired by JP Morgan Chase over the weekend in an effort to salvage the failing institution.  The buyout of Bear Stearns by JP Morgan Chase - termed a “shotgun marriage” by some - was consummated after the Federal Reserve agreed to provide up to $30 billion in non-recourse financing to JP Morgan, with Bear Stearns’ illiquid mortgage and other securities as collateral.  When the dust settled, JP Morgan ended up buying Bear Stearns for a paltry $2.00 a share, a fraction of what it was once worth.

Left holding the bag are Bear Stearns stockholders.  Bear Stearns is being sold for just $236 million. The deal’s value is more than 90 percent below the company’s Friday closing share price of $30.85.  Earlier in the week, the stock had been selling for as much as $60 per share.  But even as the investment bank was crumbling around them, Bear Stearns executives maintained that the bank was solvent. (more…)