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Photograph of Federal Reserve Chairman Ben Bernanke (left) testifying before the Senate Banking Committee by Susan Walsh/AP
New York Federal Reserve Bank President Timothy Geither told lawmakers today, "What we were observing in U.S. and global financial markets was similar to the classic pattern in financial crises," as Federal Reserve officials defended why they helped JP Morgan rescue Bear Stearns from collapse. Fed chairman Ben Bernanke told the Senate Banking Committee, "Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain."
Committee chairman Christopher Dodd had asked, "Was this a justified rescue to prevent a systemic collapse of financial markets or a $30 billion taxpayer bailout for a Wall Street firm while people on Main Street struggle to pay their mortgages?" JP Morgan head Jamie Dimon said, "A Bear Stearns bankruptcy could well have touched off a chain reaction at other major financial institutions. that would have shaken confidence in credit markets that already have been battered."
Bear Stearns CEO Alan Schwartz said that if the Fed had helped sooner, Bear could have avoided its current situation. Hindsight is 20/20--Bear layoffs are expected to begin in a week or so.
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So the deal was, we really liked the CEO, I mean, have you SEEN this guy play bridge? He could play bridge, I swear to God, all fucking day. He was a machine!
Now, you tell me, how I was I going to let a guy like that go bankrupt?
"Was this a justified rescue to prevent a systemic collapse of financial markets or a $30 billion taxpayer bailout for a Wall Street firm while people on Main Street struggle to pay their mortgages?"
Is it possible that it was both? That yes, we needed to do something to keep the entire market house of cards from crashing down upon itself but that there are individuals that needed that money just as much. My father keeps talking about how it feels like the 1970's all over again... let's just hope it's not really the 1920's...
Old lawmakers? That's ageism!
Can someone explain to me how a "loan" is a "bailout"?
It is a bailout because the fed are accepting $30 billion of toxic compromised securities that BSC could not sell without recording huge losses, and the fed are accepting the BSC march 1st "book value" for them.
The treasury (us) are on the hook for the deficit on sale that will be recognized quarter by quarter over the next few years.
Ben: I have a 17 year old rusty chevvy on blocks that due to an odd lack of "liquidity" nobody wants to buy from me for $12,000. I can't meet my bills this month and nobody will loan me money, here, take it as collateral, and give me $12,000!
It is a bailout: in the case of JPM, a $29 billion dollar government bribe for them to take the company and untangle the mess rather than let chapter 11 do it, and in the case of the other broker/dealers, an open-ended rolling loan that takes securities that they cannot sell to anyone else without taking a loss.
"why they helped JP Morgan rescue Bear Stearns"?
"Rescue"? Raid is more like it. What BS...
If I make a mistake I hope the government is able to bail me out.
If I make a mistake I hope the government is able to bail me out.
Bankruptcy laws, medicaid, welfare, food stamps, grants, student loans...
I'm sure we'll have some money for you.