Today JP Morgan upped its bid for Bear Stearns, not in the face of a competing bidder but over apparent rumblings from Bear Stearns shareholders unhappy with last week’s announced deal. If however, Bear Stearns is really worth five times what Morgan offered one week ago, you would think that it would make room for Morgan to assume the risk of the $30 billion of assets the Federal Reserve Bank promised to back in the original March 16th deal brokered by the Fed.
As we dig ourselves out of the economic crisis created by mispriced risk, it is probably not a good idea for the Fed to be taking risk off of the table.
