Direct loans to Bear Stearns via JPMC

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The Direct loans to Bear Stearns via JPMC

The Federal Reserve loaned Bear Stearns, using JPMorgan Chase as a pass-through, $12.9 billion over three days in March 2008 to provide it the liquidity to meet its short-term obligations. Bear Stearns had invested heavily in mortgage-backed securities (MBS) with much of the financing coming through the short-term repo market for MBS, but that market of financing had dried up as lenders became skittish about MBS overvaluation. Bear Stearns went to the Fed for financing because its short-term repurchase (“repo”) financing was coming due and it could not refinance, leaving it unable to make good on its other debt obligations. The Federal Reserve said it made the loan because Bear Stearns was “a major borrower and lender in the repurchase agreement market [and] could have seriously disrupted this very large, important, and increasingly strained market for short-term secured financing. Market participants were likely to respond to the failure of Bear Stearns by withdrawing generally from short- term collateralized funding markets, resulting in a dramatic drop in the overall availability of short-term financing, and threats to the liquidity and possibly the solvency of other large and highly leveraged financial institutions.”[1]

Wall Street Bailout Accounting
(back to main table)
DIRECT LOANS TO BEAR STEARNS VIA JPMC
Balance Sheet
Disbursed*: $12.9B [2]
Current outstanding: $0 [3]
Public Funds
Maximum at-risk: $12.9B[4]
Current at-risk: $0 [5]

* See the methodology and glossary for definitions of "disbursed," etc.

Funding agency and aid type

The funding agency was the Federal Reserve Bank of New York.

Cash loan.

Who benefits

JPMorgan Chase (now owns Bear Stearns) other investment banks and investors in the repo market.

Background

Notes

The FRBNY made a loan of $12.9 billion at 2.25% interest to JPMorgan Chase on Mar. 14, 2008 to facilitate its acquisition of Bear Stearns. The loan was repaid with $4 million in interest on Mar. 17, 2009. The Federal Reserve claimed authority for the loan section 13(3) of the Federal Reserve Act.”[6]

Articles and resources

Related SourceWatch articles

References

  1. Federal Reserve – Board of Governors, ”Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear Stearns Companies Inc.Through JPMorgan Chase Bank, N.A.”, p. 3
  2. Federal Reserve – Board of Governors, ”Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear Stearns Companies Inc.Through JPMorgan Chase Bank, N.A.”, p. 3
  3. Federal Reserve – Board of Governors, ”Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear Stearns Companies Inc.Through JPMorgan Chase Bank, N.A.”, p. 3
  4. Federal Reserve – Board of Governors, ”Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear Stearns Companies Inc.Through JPMorgan Chase Bank, N.A.”, p. 3
  5. Federal Reserve – Board of Governors, ”Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear Stearns Companies Inc.Through JPMorgan Chase Bank, N.A.”, p. 3
  6. Federal Reserve – Board of Governors, ”Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear Stearns Companies Inc.Through JPMorgan Chase Bank, N.A.”, p. 3

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