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Photograph outside Bear Stearns' offices on Friday by Mark Lennihan/AP

It's the New York banking equivalent of the Enron meltdown: Bear Stearns has agreed to sell itself to JP Morgan Chase at a fire sale price. When Bear Stearns' 14,000 employees left work Friday afternoon, the bank's stock had already plunged almost 50% in value, closing at $30 a share. But today they found out something much, much, much worse: their company has been purchased for a piddling $2 a share. That's $236MM for a company that was "worth" $3.54 billion on Friday. That's a 93% discount on Friday's closing price, and a 99% discount off January 2007's price of $170/share. Given that Bear Stearns' midtown headquarters had been valued as high as $1.5 billion, the firm's liabilities must have been enormous.

According to the NY Times, Bear Stearns' execs spent the weekend desperately trying to find a buyer willing to pay anything for the bank. To get the deal done, the Federal Reserve agreed to step in and help the bank remain liquid-- providing a $30B loan and agreeing to take over the administration of some of the bank's assets. Many speculated that if the Fed didn't step in, Monday's trading could have seen "ominous market disruptions."

The Wall Street Journal reports employees, who own about 30% of the stock, were hoping for a foreign buyer to avoid the massive layoffs which come with domestic mergers. With JP Morgan as the buyer, layoffs are almost certain, and the effect on New York City's budget and economy will not be good. That last point is hard to dispute: just last month, Citigroup wrote down a $10 billion loss on bad debt. And more is yet to come: the WSJ says that the effect of Bear Stearns' collapse could be dire. If Bear Stearns is worth just 2.5% of its previously stated book value, how much are all the other investment banks worth?

Update 10:36PM: the Nikkei index is down more than 500 points. And American stock index futures are also pointing south. Uh-oh!