JPMorgan confirms merger pain

More than 7,600 Bear Stearns employees, about 55 percent of its staff, are expected to lose their jobs as the troubled investment bank is absorbed into JPMorgan Chase, JPMorgan chief executive James Dimon said.While discussing the historic US$1.5 billion (HK$11.7 billion) Bear Stearns takeover during Morgan’s annual shareholder meeting, Dimon said “we’re retaining 45 percent of Bear Stearns staff.”

Dimon’s remarks, made late Tuesday in New York, confirmed months of speculation that half of Bear’s employees would lose their jobs as a result of the merger.

In other corporate news, UBS said it made a huge loan to Blackrock so that the US asset manager could buy US$15 billion of distressed assets from the Swiss bank, easing the strain on UBS’ balance sheet, but not freeing it from the risk.

In a deal similar to one used by US bank Citigroup to offload subprime assets, UBS said yesterday it had provided 75 percent of the funding used by US- based Blackrock to buy the portfolio.

Blackrock raised US$3.75 billion in equity from investors to pay for the rest of the package, UBS said.

Investors have welcomed the move. But by lending money to Blackrock to allow the US asset manager to buy UBS assets, the Swiss bank has engaged in a common form of regulatory arbitrage – in effect, swapping equity exposure to subprime mortgages for debt exposure to Blackrock – and remains exposed to some of the risk in the distressed assets.

Maurice “Hank” Greenberg, former chief executive of American International Group, may face civil charges for his alleged role to improperly boost the insurer’s financials, a spokesman for Greenberg said yesterday.