Well we all herd the rumor. We will find out truth tomorrow. Think it will happen?
There is a rumor circulated on Wall St. that JP Morgan (NYSE: JPM) will take over Bank of America (NYSE: BAC) within the week. The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity.
Alternatively, the government may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon.The “merger” would completely destroy the value
of BAC’s common shares.
BAC's shares are already in the hole. Also, I'm not to familiar with mergers and such, but how can they do this? This is not JPM buying some large regional bank, these are both top 5 banks in the US. It seems incredulous that this does not overstep some antitrust laws or something of the sort? Brings a new standard to "too big to fail".
I'm hearing from my sources that this is complete bullshit.
So it might actually be true.
The FDIC sets a cap that no individual firm is allowed to control over 10% of the nations deposits. BAC has been over that limit for a while has been selling deposits left and right for ages. JPM is currently floating around the 9% mark. Just for this alone the deal will never go through.
Edit: I can't imagine the Treasury pushing something like this through. After the way the Gov't has been crucified for propping up shitty mergers in the wake of Lehman and Bear, there's no political will for any type of Gov't subsidized merger.
How would it even happen? What would the financing look like? I pity the poor guys who have to model this thing.
Sooooooooooo.... you are saying we should buy BAC?
I think short. Deal or no deal. They suck
GREAT!
The only way this deal will go through is in the event of cataclysmic events that require the government to take action in order to have this happen. Although the FDIC rules are in place for a reason, there are substantive clauses that allow for emergency actions to be had if in the event of total catastrophic failure of the system. Despite the fact that there is an extremely unlikely probability of this happening, in the advent of the extreme situation, it can occur.
Will it occur without a certain amount of backstopping, like in the cases of Lehman and Bear? Yes there would, that's a given. If you look at the debt profile of Bank of America, it needs to happen, as there is debt on their books that is pretty damned toxic. Unlike Bear and Lehman, however, you are not backstopping a collection of bad debt held solely by an investment bank. You are backstopping a large bank that has a high percentage of the outstanding depository base relative to other depository institutions. Looking at the Big 4 (Citi, JPM, Wells Fargo and BoA), they hold the largest concentration of retail deposits, at approximately 40% of the outstanding deposits. If Bank of America were to fail, there would need to be a backstopping to prevent the bleeding and a major bank run.
That said, if this were to happen, if the buying institution (or consortium) already had a significant depositary base (like in the event of JPMorgan), you would be entering the realm of antitrust and monopolistic litigation. This would, quite simply, force the bank to be broken up in order to both reduce the risk of institutional failure and prevent the remaining firms (or the newly formed superdepository institution) from engaging in unfair practices to drive other depository companies out of business. Then again, it's also a surprisingly complex set of circumstances which will be a great case study for future law and MBA students if this does happen.
Lets say this deal goes through. Where does BAC stock price jump to?
It seems pretty obvious, buy all you can afford to. I'd say a 50% jump within minutes. I am a licensed IA, please take my advice.
confirmed.
Any ideas on what the share price JPM is buying BAC at?
LOL. You guys are assholes.
It is confirmed. Just wait till tomorrow morning.
BofA denies it in memo to employees yesterday:
http://www.washingtonpost.com/business/bank-of-america-tells-employees-…
[quote=Edmundo Braverman]BofA denies it in memo to employees yesterday:
http://www.washingtonpost.com/business/bank-of-america-tells-employees-…]
Washington Mutual told its employees the same thing before JPM ate them up.
Eddie,
Agreed... what a bunch of assholes. Stop propagating the rumors, particularly when they are unfounded. I mean, yeah, it's BofA, and they, if you take Blodget's view, are pretty seriously underfunded with respect to capital, but this rumor has no merit.
I will restate what I said before. There is no way in hell this deal will go through except under extreme catastrophe, and even then, their Investment Banking unit will be sold and the retail banking unit will be put into conservatorship if it comes down to it before the bank is "taken over" by a competitor. And even if it does go through that JP Morgan does intend to buy Bank of America, this will need to clear a full DoJ (Department of Justice) inquiry because there is no way in hell that they would let this happen as is. There are too many issues that need to be resolved before this sale could even happen.
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