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From CNBC:

JP Morgan Chase is now the most likely buyer for troubled investment bank Bear Stearns, senior executives inside Bear say.

A deal in principle could be announced Sunday night, although the agreement would still need shareholder approval.

Here's what makes this a tricky situation: without shareholder approval, there is no real deal, so other banks and clients may be reluctant to deal with Bear on Monday unless it's part of a well capitalized JP Morgan.

Because of this, most executives inside Bear believe the Federal Reserve and Treasury will play some role in making sure there is a backstop if the shareholder approval isnt reached....

On Friday Bear Stearns, the fifth largest U.S. investment bank, said a cash crunch forced it to turn to the Federal Reserve and JPMorgan or emergency funds, intensifying fears of a widening global credit crisis and driving its shares down as much as 50 percent. It also stepped up efforts to find a buyer.

On the same day S&P lowered its long-term counterparty credit rating on Bear to "BBB" from "A," and it placed long-and short term ratings on credit watch with negative implications.

Because of that S&P downgrade, bankers came to the conclusion that a deal must be done by Monday morning because no one on the street will trade or lend to Bear Stearns, which is rated a notch above junk bond levels. If the downgrade hadn't happened, Bear management would have had more time to work the Street for a deal, sources said...

Sources tell CNBC that CS First Boston will be cutting jobs this week in its investment banking department and big cuts are looming at Merrill Lynch, where middle managers are bracing for cuts of 10 percent across the board. Also sources say Lehman Bothers will likely be in for turbulence given its own holdings of risky commercial real estate bonds...

Bear, however, will dominate headlines on Monday. Aside from the financial fallout of a major firm disintegrating, there will likely be massive legal issues.

Executives inside Bear are bracing for major lawsuits from investors, and not just over the public comments made by the CEO Allen Schwartz and CFO Sam Molinaro to CNBC last week where they sought to calm the markets about Bear's financial status. There also is worry about lawsuits claiming general mismanagement of the firm by top executives, like Chairman Jimmy Cayne and others .

The biggest loser in all of this are the 14,000 employees of Bear. Employees own close to 25 percent of the firm, meaning top execs net worth has been nearly destroyed in recent months. And if the sale price is what many inside Bear expect, possibly less than $15 a share, these employees will be left with next to nothing...

I was going to annotate the story, but it is self explanatory. If BSC is sold anywhere near $15 per share, or even it isn't, just add the portfolio and geogrpahic diversity premium of 20%, tack on another premium of 15% or so for size advantage, then mark all of the other I banks to market. Can you see the carnage in store if people really decide to do their math for a change? Bear Stearns is not that different from any of the other banks on the street. I can tell you know, Goldman has been given a free pass over the last few months, and I feel the jig will soon be up.