JPMorgan to Buy Bear for $2 a Share

"This is going to go down in very historic terms," said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. "This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we're probably heading into a recession."

The government, led by the Treasury Department and the Federal Reserve, was reported to be closely monitoring the talks. Any deal to rescue Bear Stearns was seen as a lifeline for the entire financial services industry, helping to stave off further weakness on Wall Street.

Treasury Secretary Henry Paulson, former chief executive of Goldman Sachs Group Inc., "has been in nearly continuous consultations all weekend," said Brookly McLaughlin, a Treasury Department spokeswoman. She wouldn't comment on the timing of any deal, other than to say "these things are never done until they're done."

After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.

Among the Wall Street investment banks, Bear Stearns was the most closely exposed to the mortgage crisis. The collapse of two of its hedge funds last summer was seen by many as one of the triggers of the current credit crisis.

Management at Bear Stearns worked on Sunday to call clients in Asia who are worried about their business relationship, according to a Bear Stearns employee who was not authorized to speak. Many customers have pulled business from the ailing investment bank since Thursday when rumors began to circulate that it was close to failure.

Many of Bear Stearns' 14,000 employees were phoned Sunday and told to show up to work at 7:30 a.m. EST, the person said.

The Journal also reported that if a deal with JPMorgan were to fall apart, Bear could conceivably file for bankruptcy late Sunday before Asian financial markets opened.

Calls to Bear Stearns and JPMorgan were not immediately returned. A spokeswoman for Lazard Ltd., the investment bank representing Bear Stearns in the talks, did not immediately return phone calls seeking comment.

This is not the first time Bear Stearns has earned a place in Wall Street history.