Why would JP Morgan Chase need more capital?
They just raised $10 billion, $2 billion more than they said they would, in the most choppy and difficult markets in decades, a week ago or so.
No wonder their shares were ... down in today's up trading day. They just got "involuntarily injected".
Does he think the market will not eventually see through this cloak-and-dagger routine and wonder why $10 billion more is enough for Morgan Stanley and Goldman, presently, but the $11 billion equity raise that Lehman did months before their downfall was ... not enough.
I'll bet Citigroup is pissed that they didn't try to bid more, now that the taxpayers are subsidizing BOA's purchase of Wachovia (with an "extra" $5 billion "injection").
WE SHOULD HAVE KNOWN
This is what happens when you hired investment bankers. They do deals.
NEXT WEEK'S HEADLINES
What would you do if someone forced you to take capital?
I'd buy back either high-yielding debt or common shares.
update: it appears that you cannot buy common shares, while the government is involved.
Or, I'd write down the worst of my assets, like my commercial real-estate portfolio, my buyout loans ...
I'd hang onto my sub-prime junk. Why? I might get to sell it to Paulson's Cash-and-Carry guy for an above-market price.
To be charitable, maybe there is something we don't know. Maybe they need the money, so they can comply we conservative accounting principles for assets? ... this is still the Bush Administration. Would you put a high probability on that?
update: a second possibility - the government is setting up a few large players to consolidate the industry's laggards, the ones the FDIC is expected to "process" in the upcoming quarters.
Tuesday, October 14, 2008
Why did Paulson do it?
