Meet The Money Center Scavengers
A number of money center banks, both nationally and internationally, have used the current credit crisis as an opportunity to purchases complete investment banks or portions of investment banks on the cheap.
A money center bank is a bank that deals with other corporations, other banks and governments.
JPMorgan (NYSE:JPM) had the opportunity to purchase Bear Stearns for $2 a share when the company was trading much higher the Friday before a Sunday morning sale arranged by the government. Likewise, Bank of America and Barclays PLC have come in and taken over distressed brokers Merrill Lynch and Lehman Brothers respectively when just three months ago the companies would have been untouchable. In this article we'll look at all three deals to see which bank made off with the best prize.
JPMorgan stole Bear Stearns and later went back for Lehman Brothers but the same take away offer was not given to the bank by the Treasury. JPMorgan CEO Jamie Dimon is one of the best operators in the business and came away with some of the Bear Stearns' assets extremely cheap. A government bailout and then a very low asking price were meant to punish the risky behavior of Bear Stearns, but the actions of the Federal Reserve and the Treasury may have only benefited JPMorgan Chase and the employees at Bear that are able to keep their jobs.
The company considered Lehman Brothers also but waited and picked up the better performing Merrill Lynch at a decent price. It could have paid less if it had waited a couple of days, but Bank of America went after the company that it felt would provide the best resources for growth going forward when the price was suitable. Bank of America will now become the biggest brokerage in the country after already acquiring its way to being the biggest retail bank and credit card company in the
Barclays PLC's (NYSE:BCS) president Bob Diamond and bought up pieces of Lehman Brothers (OTC:LEHMQ) after the company declared bankruptcy. Many have wondered why Henry Paulson and the U.S. Treasury Department let Lehman Brothers fail when the same government body forced the sale of Bear Stearns prior to failing. But the actions of Paulson allowed Barclays to get the best deal of all the money center bank deals that have occurred to this point during the current credit crisis. (Given the current economy the word bankruptcy is getting a lot of play. If you want to learn more about the subject take a gander at What You Need To Know About Bankruptcy.)
Barclays had considered purchasing all of Lehman just days before but now it got the best pieces and left the rest for another buyer. This was similar to the Bear Stearns deal, except Barclays was able to pick and choose the assets it wanted. One of the prizes in the deal was purchasing Lehman's