JPMorgan Chase on sunday announced its decision to takeover one of the most written about investment banks, Bear Stearns at 2$ a share. The decision at the last minute was made to avoid a global crisis in the investment and financial system.

One of the worlds largest investment banks and brokerage firms and securities trading firms in the world is The Bear Stearns Companies, Inc. (NYSE: BSC) who is the parent firm of Bear, Stearns & Co. Inc. The fed has reportedly agreed to finance a part of the deal and hence avoid a bankruptcy of the nations fifth largest financial institution. The federal also at the same time informed a major cut in lending rates to banks from 3.50 to 3.25. Analysts believe that this will be further reduced by a whole point upto 2% soon.

The federal approval of the takeover has been shift and they wanted to complete it before the world markets opened. The stock of Bear Stearns closed at $30 a share in the last trading session. The deal was expected to provide some relief to the markets world as was seen in the New Zealand which opened low and picked up as the deal was announced.

Unwanted bets on securities tied to sub prime  mortgage, loans to poor credit history customers all led to the collapse of Bear Stearns. Bear stearns collapse would have caused a huge downpour across the global as per analysts who believe that a collapse of Bear Stearns would have caused huge losses to banks and other investors in the bank.

The Bear Stearns company is best known for its aggressive investments in mortgage based securities.  A fed led bailout plan with JPMorgan along with a 28 day loan to JPMorgan to make sure they do not suffer any losses on the deal was the first of its kind.

photo credit: WordRidden