I'm tapped out Marv. American Express' got a hit man lookin' for me

Picture this.

Take the population of a large US City. Imagine those people going to the same bank, at the same time, to withdraw money. What would you think happens next? If you guessed that the bank would run out of money you are today's grand winner.

The above scenario is exactly what happened to Bear Stearns.
Well, in easy terms that is what happened. In a more detailed financial terminology read on.

Bear invested a great deal in subprime mortages and mortgage backed securities. Too things alike. Maybe a little too much. After it's two biggest hedge funds hemorrhaged they were forced to bail them out with a huge loan up to 3.2 billion. The hedge funds lost everything and were subsequently shut down. Jobs were lost, people sued. The firm lost 61% of their profits starting a chain reaction of bad news from that point on (S&P cut their ratings, liquidity questions, write-downs, etc). After writing down 1.2billion in subprime losses Bear reported a loss in the fourth quarter for the first time EVER. Just about three weeks ago liquidity issues dogged them to the point where every loan Bear had taken out were being called back for payment (my bank example). Bear went from having a cash reserve of 18 billion on Tuesday to Zero on Friday.

In steps in the Federal Government. The Fed was due to open up lending to brokerage firms and investment banks to prevent this from happening but weren't planning on doing so until March 28th. Bear needed it now. Jp Morgan Chase came to the fed to act as a liaison (banks can use the Fed window whenever) between Bear and themselves. From that a takeover bid was drawn up after Jp Morgan rescued them with a 28 day emergency loan. Initially the bank offered them $2 a share in a all-stock deal but that was rebuffed, and rightfully so, and changed to $10 a share. Still peanuts for a top 5 firm that had it's stock trading above $100 most of 2007. Either way it was a sad demise for a financial institution that has been standing for the past 85 years. This story is not over.

Personally, I hope the employees end up gaining something in all of this but it's hard to realistically think they will. Most takeover bids result in massive layoffs. Imagine being at a place 20+ years and saving money in a 401K, and imagine you own company stock or get paid in stock options. Imagine going to bed one day with a cool million in the bank to retire with and waking up with a not so cool hundred thousand that you'll use the first couple months of retirement. Sad.