When the big banks are buying you down with a $25bn takeover offer
A $25 billion takeover offer by the world’s largest banks is coming to fruition, according to financial reports.
The offer from US bank JPMorgan Chase, the biggest lender in the country, was made public on Wednesday, with the banks expected to announce the deal at the beginning of next week.”JPMorgan Chase will announce the transaction and the transaction fee at its quarterly earnings call, the bank said in a statement on Wednesday.
The banks would then have until April 17 to file for an extension of their respective term extensions, which would give them until the end of June to complete the deal.”
The agreement is expected to close by the end to March 31,” a statement from the bank added.
The deal would see the banks take over the entire US mortgage-backed securities market.
The move would be the largest acquisition in US financial history.
The biggest banks would take control of $25.6 trillion of mortgage-related securities and $6.3 trillion of commercial and industrial loans, according a report from Goldman Sachs.”
This transaction is expected give the banks access to $25 trillion of collateral and $15 trillion of leverage,” the bank’s report said.
This deal would give the lenders a new source of capital to back up the mortgage market,” Goldman Sachs said.””
The banks have been in talks with a number of potential buyers for months.
This deal would give the lenders a new source of capital to back up the mortgage market,” Goldman Sachs said.”
However, with an ongoing $7 trillion in outstanding mortgage-rated and other government-sponsored securities, the banks are likely to need additional financing from their counterparties,” it added.
On Thursday, the US Treasury Department confirmed that the banks had received an extension to the extension.
“Treasury is confident that JPMorgan Chase will execute its transaction with the intent to complete it on time, on time and on budget,” a Treasury official said in the statement.
“It is expected the bank will complete the transaction within the required time frame.”
JPMUCHIE’S EXECUTIVE SUMMARYThe bank said it would be taking over $30 billion of mortgage securities and commercial and other loans, $5.5 billion of which would be issued to the US government and $3.9 billion of the other $3 billion would be loaned to other government entities.
The bank would be able to tap into an additional $15 billion of its existing collateral pool, which includes commercial paper, cash, deposits and mortgage-rating and other financial instruments, according the bank.JPM Morgan is looking to buy up more than $25tn of mortgage backed securities, which is more than the $12.6tn of outstanding mortgage debt held by the US and the world over, according Bank of America Merrill Lynch.
JPM and other major banks have made large loans to the government during the financial crisis, including $4.5tn of loans from the US Federal Reserve, according research by the investment bank Citigroup.
The Fed’s stimulus package, announced in December 2010, included $4 trillion of stimulus loans to banks, Citigroup said.
In March last year, the Federal Reserve made a $3bn loan to JPMorgan Chase to fund the bank in the second half of the financial year, according data from Bloomberg.
The US Treasury has said the banks will be able take a majority stake in the deal through the end on April 20.JETE: JAMMU CHASE TO APPROVE $25 BILLION DEAL WITH BUZZFEED AND OTHER BANKSThe offer, however, will require approval from the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the US Securities and Exchange Commission (SEC), the Treasury Department, and the Office of the Comptroller of the Currency.
“These agreements are subject to approval by the appropriate regulatory agencies,” the Treasury said in its statement.
The bank also needs approval from all relevant US federal and state governments, and a US court.
“The transaction will require the approval of the US Congress and the Federal Financial Institutions Examination Council, which will determine whether the proposed transaction is permitted under federal law,” the statement said.
The banks are also required to pay US tax on the transaction, a process that will take two years.
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