The supposed Pulitzer-Prize fodder over at the WSJ about the Bear Stearns collapse includes what is now being called the “loophole legend”:
The hurried deal had a loophole that could give angry Bear Stearns investors powerful leverage to seek a higher price: J.P. Morgan had pledged to finance Bear Stearns's trades for a year -- even if shareholders rejected the deal. Unfortunately for the drama of the story,
I discussed this legend-in-the-making at the time the transaction was unfolding.
But John Carney over at Dealbreaker points out yet again that this legend “probably isn’t true.” In fact, JP Morgan needed the durable guarantee to send a very strong signal that would stop the run on Bear. Indeed, the WSJ story supports this take, since it emphasizes that previous efforts to shore up confidence didn’t work.
(Carney also asks whether JP Morgan would have been willing to pay 750 million more over a mistake. Actually, yes, given the difficulty of proving that the parties' actual intent deviated from the words of a very heavily lawyered document.)
Carney adds that no one has been willing to support the legend on the record, and it was not in Bear Stearns' proxy statement description of the transaction. As Carney says: “The omission of the loophole legend suggests that the executives at Bear Stearns and JP Morgan weren't as comfortable telling that particular tale in a forum where they could be held to account for their veracity.”
Carney is suggesting that Pulitzer-seeking journalists are not similarly “held to account” in repeating without qualification off-the-record speculation for purposes of dramatising a story even after significant doubts about the speculation had developed. But at least in this web-enabled world we do end up with something like the whole story.
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