Reply #26: Fed and Rival Bail Out Bear Stearns (done deal)

[ozymandius]

Source: AP

NEW YORK (AP) -- On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government. The near-miss raised new alarm about the credit crisis -- and whether other big firms might be in jeopardy.

.....

If Bear Stearns were to go under, "it has the potential of bringing down the whole market," said Richard Bove, an analyst at Punk, Ziegel & Co. "This is the crescendo of the crisis."

.....

In backing up JPMorgan, the Fed dusted off a rarely used, Depression-era provision to provide loans. It also said it was ready to step in to fight an erosion of confidence in the nation's largest financial institutions.

.....

JPMorgan, the nation's third-largest bank, has been hurt far less by the mortgage mess than other financial institutions. It will provide secured loans to Bear for four weeks -- insured, in essence, by the Fed.

Schwartz said it would buy Bear time and allow it to convince customers "that we have the ability to fund ourselves every day, to do business as usual." No one has disclosed how large the financing offered to Bear Stearns is.



Read more: http://biz.yahoo.com/ap/080315/bear_stearns.html

---

We may also bee looking at an outright sale of Bear Stearns to JP Morgan with Fed backing.