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: Law Blog - WSJ.com

Bear-JPM: Legal News and Views

By Dan Slater

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jpm The Bear story’s getting some legal juice.

The Journal’s Dennis Berman today asks, who’s making the rules in this deal? The Fed seems in charge for now, but what about Delaware courts? Or Congress? Monday’s deal, he says, could test “long-held conventions of corporate law: at what point of emergency are shareholder interests superseded by national ones? If there isn’t such a standard, might Congress override states to make it so?”

Did J.P. Morgan leave itself over-exposed in its original deal to buy Bear Stearns? If so, was it due to a drafting misstep by their Wachtell lawyers? Ashby Jones tries to pick that one apart in today’s WSJ. The docs said JPM’s guarantee of Bear’s covered liabilities extended even if Bear shareholders voted down the deal. Some profs think that such a guarantee had to have been an oversight. But others say it seems in keeping with Bear’s goals at the time and echoes what a senior Bear exec said on a conference call as the deal was announced. Either way, the language was narrowed in the revised deal, as that’s what JPM chair Jamie Dimon wanted, according to the NYT.

In other JPM-Bear news, Andrew Longstreth over at Am Law reports that Simpson Thacher, longtime outside counsel to JPM, was quietly called on last week to represent the Federal Reserve Bank of New York, which, through an LLC set up for this deal, will take control of a $30 billion portfolio of Bear assets in exchange for $29 billion in term financing.