JP Morgan & BOA: There is a rumor circulating on Wall St. that JP Morgan will take over Bank of America within the week. The govt will support the deal with a $100b investment in preferred shares issued by the combined entity. Alternatively, the govt 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.
The govt feels that the deal may be necessary as Bank of America struggles unsuccessfully to close several transactions to bolster its balance sheet. The Wall Street Journal reported that Business Insider speculated that the financial firm will need to raise $200b which would be another possible event that would wipe out common shareholders.
Note however that this is a mkt rumour, and whether or not the event will actually happen is questionable.
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