Schwartz disclosed that the bank's liquidity position "significantly deteriorated" on Thursday, after a series of reports raised questions about Bear's ability to deliver on long-term trades. Schwartz on Wednesday had said the bank had about $17 billion in cash, little changed from Feb. 29.
"At the pace things were going, we recognized it could be that continued liquidity demands would outstrip our liquidity resources," Schwartz said in a statement. "We felt the need to move quickly to conduct normal operations to calm things down and let some facts into the marketplace."
Bear Stearns, JPMorgan and Fed declined to comment. A source briefed on the situation said that without the Fed's intervention Bear would not have had enough cash to open for business Friday.
"I think this is a bridge to a permanent solution," Schwartz said during a conference call with investors. He said the lending facility is sufficient for Bear to fund its daily activities, conduct "business as usual."
Yet he left the door open to pursuing other deals.
"We'll be looking for any strategic alternative that allows us to protect our customers as well as maximize shareholder value, and we'll look at a range of alternatives," he said.
Industry watchers predicted dire consequences for the bank going forward, suggesting that one alternative would probably be a sale.
"I'd say stick a fork in them, they're done," said James Ellman, portfolio manager at Seacliff Capital, a San Francisco-based hedge fund. "The company clearly has to choose from a set of unpalatable choices: sell a large amount of equity, sell the company outright, or sell assets and try to hold on and hope for the best."
Veteran bank analyst Dick Bove, with Punk Ziegel & Co., played down the speculation of an immediate sale, saying such a transaction would not be possible while the Fed is involved.
"The fact of the matter is no one is willing to buy Bear," he said.
It has been a rough honeymoon for Schwartz, a star investment banker who took over as CEO in January, after heavy losses last year prompted James "Jimmy" Cayne to step aside.
Analysts said the news from Bear, which came just one day after investors had been soothed by a Standard & Poor's report that subprime mortgage-related write-downs are likely more than
halfway done, suggested that the full impact of the global credit crisis has yet to be felt.
Indeed S&P on Friday 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.
"This tells you we're not over the worst yet, and there are still some players out there who are vulnerable," said Stephen Dowds, head of international equities at Northern Trust in London. "We expect more transparency next week when we get results from the U.S. financial sector.
Shares of Lehman Brothers Holdings fell sharply, as did Morgan Stanley and Goldman SachsGroup.
JPMorgan said it does not believe the Bear transaction exposes its shareholders to any material risk. The Fed declined to comment, but it will mirror actions taken by JPMorgan, providing liquidity to Bear indirectly through JPMorgan.