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The Fed, Bear Sterns, and JP Morgan
By Jon Menaster | March 30, 2008
So I’m sure you heard all about how the Fed was stepping in to save Bear Sterns from imminent disaster; but maybe you weren’t quite sure how it all worked. Business Week has a detailed breakdown explaining what the Fed is doing and why it may never have done anything like that before. From the article:
Here’s how it works: A Delaware-based limited liability company will be set up to receive, upon completion of the merger, $30 billion in various Bear holdings, such as mortgage-backed securities. The Fed will lend $29 billion to that company, which will pass all the money along to JPMorgan, Bear’s new owner. JPMorgan itself will lend $1 billion to the Delaware company. The company, managed by BlackRock Financial Management, will pay back the loans by gradually liquidating the assets. As a protection for the Fed, it gets paid back fully before JPMorgan gets back anything on its loan. The other sweetener for the Fed is that if there’s money left over even after JPMorgan gets repaid, the Fed gets it all.
Curiouser and curiouser…
Topics: Money News |