FINA3304 Banking Case Study: JP Morgan Chase and Bear Stearns

This case study analyzes the roles of JP Morgan Chase and Bear Stearns during the 2008 financial crisis, examining the collapse of Bear Stearns and the subsequent actions taken by JP Morgan Chase and the Federal Reserve. The assignment explores key banking and finance issues, including capital, liquidity, and bank valuation, while also delving into aspects of investment bank governance. The analysis covers JP Morgan's influence in stabilizing markets, the Federal Reserve's intervention, and the implications of the Bear Stearns acquisition. It also discusses the concept of pure-play investment and the challenges faced during the crisis, offering insights into the broader context of the financial turmoil and the strategies employed by key players. References from various sources are included to support the analysis.

Running head: QUESTIONS 1
Finance
STUDENT DETAILS:
5/5/2019

QUESTIONS 2
Answer 4-
As the "Bulge Bracket" bank, JP Morgan Chase is main contributor of numerous financial services as well
as investment banking services during the period of JP Morgan. In the absence of central bank in USA, it
has used the influences to save the country from tragedy during various financial crises. In year 1895, JP
Morgan assisted to rescue the gold standard of USA while it headed the banking organization that
advanced the central government exceeding sixty million dollars. As per other example, the economic
terror of year 1907, Morgan organized the meeting of top financiers of companies at his New York. JP
Morgan influenced these top financiers to give the financial guarantee to numerous financial institutions
for stabilizing the marketplaces. In year 1895, J.P. Morgan Chase supplied the United States
governments of USA with Sixty two million in gold bars for floating the bond issue and restoring
the treasury surpluses of one hundred million dollars. Further, in year 1892, the corporation started to
provide the funds to New Haven, New York as well as Hartford Railroads and led this by the purchase
series, which created this the dominant railroad mover in England. It also made investment in the
dealers of war machinery to France as well as Britain. Therefore, the organization got profit from the
funding and buying activities of these governments of Europe (Wingfield, Thomas and Abelson, 2018).
Further, the eighty five years old investment bank Bear Stearns, has acquired by JP Morgan Chase at
lowest price of two dollar per share. The Federal Reserve would render approximately thirty billion
dollars to JP Morgan Chase to assist this funds and acquisition. JP Morgan Chase would purchase
concerned investment bank Bear Stearns at low cost of two dollars per share, a transaction rapidly
accepted over the weekend through Federal Reserve. It targets to retain the financial colossal from
failing from the loss in the subprime credit disaster.

QUESTIONS 3
Furthermore, the controllers carry the deal. The Federal Reserve rendered thirty billion dollars in
financing with international credit crisis deterioration, the Fed has considering theatrical actions to assist
the bank and stop extensive panic. JPMorgan would probably focus over keeping the customers of this
division, when attempting to wring out price from business the two have in common, like investment
banking, merger and acquisition or the researches. However, at two dollars per share, the bar is not
high to create deals very Scost-effective.
Moreover, the danger for him would be the possible contact to lawsuit from subprime mortgage section
of Bear Stearns and risk from the derived business. It has fourteen thousand workers internationally and
planning for them was not created simple. According to the deal, JPMorgan Chase would significantly
action as the backstop for the current business organization with Bear Stearns till the deals are
concluded. Though Bear stakeholders were for denying the takeover that JPMorgan executive supposed
was unlikely, all dealings leading up to then should still be definite (Hearit, 2018).

QUESTIONS 4
Answer 5-
Yes, it did. The idea of pure-play states that the companies make investment of the resources on a
specific lines related to businesses that may result in probably high reward at the time when situations
are in favor of them. However, this is also escorted through high risks in a case of no any condition. It
was the matter of investment bank Bear Stearns, in which the businesses were focused exclusively over
the trading of bonds. In this way, it will appear considerably significant in the investment banking as well
as financial division with business’s nature being the changeable and with the great amount of cash
being sold having the pure-play business will seem the greatest risks strategies. The collapse or letdown
of the Bear Stearns will seem to weaken the capacity of pure-play investment bank (Thornton, et. al,
2015)
Before Bear’s demise pure-play was the usual manner of making investment because this decreased the
risks of multiplicity. Though, after the fall down of Bear Sterns, an industry was no longer permitted to
accomplish this. In this way, it can say that this was the very downfall or failure of Bear Stearns, which
head different bank to the reformation of the individual and personal programs and took away the
capacity to utilize the pure play-options (Diab, McCarthy and Masimo Corp, 2016).

QUESTIONS 5
References
Diab, M.K. and McCarthy, R.J., Masimo Corp (2016) Signal processing apparatus and method. U.S. Patent
9,289,167.
Hearit, L.B. (2018) JPMorgan Chase, Bank of America, Wells Fargo, and the Financial Crisis of
2008. International Journal of Business Communication, 55(2), pp.237-260.
Thornton, J., Glasgow, S.M., Hamza, H.R. and Ismael, I.M. (2015) Bear Stearns: A Financial Analysis of the
First Domino to Fall. New York: Springer
Wingfield, N., Thomas, K. and Abelson, R. (2018) Amazon, Berkshire Hathaway and JPMorgan team up to
try to disrupt health care. The New York Times, 30, p.52.