FAQ: Bear Stearns and JPMorgan Chase

An exuberant trader snaps up Bear Stearns for $6.32 per share.

After the news Sunday that Bear Stearns, one of the world's largest investment banks, was being sold to JPMorgan Chase, the company's stock price today values it at about the same as that taco stand on the corner.

Just what the hell is going on? Why is stock price tanking? Before you make a run on the banks or jump out the window, check out our FAQ: Bear Stearns and JPMorgan Chase.

I'm so panicked. What should I do? The stock market is crashing on the news of JP Morgan Chase buying Bear Stearns. A year ago Bear Stearns was at like $150 a share. I've lost my life savings!

You own stock in Bear Stearns?

Not in Bear Stearns, no...okay, I don't own stock at all since I'm not even really sure what it is—but I am so freaked out about Bear Stearns. We all should be, right?

Since you don't own stock in Bear Stearns you needn't be too worried.

That's a relief. Thanks. Just curious. What is Bear Stearns? It's one of these liberal, animal rights groups isn't it? Good riddance! Goddamned bears.

Easy, Jack Hannah. It has nothing to do with animals. It's a Wall Street investment house.

Where on Wall Street exactly? I need to get my money out.

You said you don't have stock in Bear Stearns.

Doesn't matter. I don't want to lose everything. Hurry up. THE MARKET IS CRASHING!

If I weren't merely a disembodied FAQ voice, I'd slap you right now.

Fine. I'm calm. So what does Bear Stearns do?

It's one of the largest global investment banks and securities trading and brokerage firms in the world. The firm's businesses include investment banking, wealth management, and global clearing services.

They're a cleaning service as well? That's insane. How are people's houses going to be cleaned if these jokers go out of business?

That's "clearing" service. It's a complex financial transaction.

Oh. I get it. That makes total sense. One question: What does all that mean?

It's not really that important for someone like...you. Here's the bottom line in language you can understand. They have clients who give them money. The clients want to make a profit. Bear Stearns invests the money for them.

Hmm. Kind of like when I was in charge of holding the donations from co-workers to buy a gift for a guy who leaving our office?

Uh, not really. Did you take the money and invest it?

I...borrowed some of it.

Borrowed? And?

Listen, I was short on my rent, so I just borrowed——

Exactly! Now you're getting it. That's kind of like what's happening at Bear Stearns. The average investor gave them some money, hoping to make a profit. But the nasty mortgage meltdown—remember that FAQ?—led to the collapse of two Bear Stearns hedge funds.

Listen, Mr. Smarty Pants, I gave the money back.

All of it?

Well...we got him a nice present. My co-workers will never know exactly where the money went.

Just like the Bear Stearns investors.

Really?

Yes, and as a result, JPMorgan Chase has agreed to buy Bear Stearns.

Yeah I heard something about that—for $2! That's crazy. I'm no financial guru, but I'm thinking I might be able to get in. I know they're doing badly and all, but I bet that building alone is pretty sweet. Tell you what, I'll make it $2.50.

The price is $2 per share, financial guru.

How many shares do they have? I could probably borrow some money from my former co-worker. He owes me one for that awesome gift we got him.

There are about 118 million shares.

Whoa. That's like...a lot of money.

$236 million, give or take.

Well, forget it then. And don't lie to me like that anymore. If you need to borrow two bucks, just ask me.

I don't need to borrow any—

Hey, I also heard something weird: James Cayne, Chairman of the Board of Bear Stearns, is an excellent bridge player. What's up with that?

Yep, it's true. In fact, he was at a bridge tournament this weekend as his firm was collapsing.

Playing bridge? That is so crazy. He should have been playing golf. That's what chairmen of the board do, right?

Right. Actually, he was playing golf last summer when his hedge funds collapsed.

This dude is hardcore. It's kind of like when my co-workers kept calling to ask me about the gift money. I was reading comic books.