Fed acts Sunday to prevent global bank run Monday ( Bear Stearns Taken over,...rates cut )

MarketWatch ^ | 9:40 p.m. EDT March 16, 2008 | Rex Nutting, MarketWatch

[Ernest_at_the_Beach]

WASHINGTON (MarketWatch) -- Acting quickly to prevent a run on major global financial firms, the Federal Reserve cut its discount rate by a quarter percentage point to 3.25% and offered to lend money to a longer list of firms than ever before.

he extraordinary weekend moves came as J.P. Morgan Chase sealed a deal to buy Bear Stearns Cos. for just $2 a share backed by funds borrowed from the Fed. The Fed board gave its approval to that unique funding arrangement, which guarantees JP Morgan against losses from buying Bear. See full story.

The Fed board also approved the creation of a special lending facility through the New York Fed that would be available to members of its primary dealers list, which includes both commercial banks and investment banks. Investment banks, such as Bear Stearns, have not been allowed to borrow directly from the Fed.

JP Morgan has access to the discount window through its Chase Bank subsidiary, but Bear Stearns does not have direct access.

Events have unfolded at warp speed over the last week. On Tuesday, the Fed announced a new lending program for primary dealers in the bond markets, but that program won't go into effect for two more weeks. On Friday, the Fed allowed Bear Stearns to borrow money via JP Morgan in a desperate bid to save the firm, which has been pummeled by losses on exotic securities backed by subprime mortgages.

The Federal Open Market Committee meets on Tuesday. Analysts expect the FOMC to cut the target for the federal funds rate by as much as a full percentage point to 2%. Another cut in the discount rate is also likely.

[Deo volente]

Well, I guess can start thinking about calling it the "St. Patrick's Day Massacre of 2008"

Not a massacre, just St. Patrick driving out some of the snakes that were in Wall Street.


Post of the Day!

Happy St. Patrick's Day!

[1066AD]

I don't think I have seen these levels in 12-15 years!

Lowest since 1995 they say.

[devere]

JP Morgan gets Bear Stearns for nothing, and is guaranteed against loss by the taxpayers. Why not just have the government take over Bear, and keep the eventual profits? This is the biggest government give-away in the history of the USA.

[vox_freedom]

We should all await Obama’s preacher and hear his views on all of this...//s

[Biblebelter]

http://www.smartmoney.com/commonsense/index.cfm?story=20080304-banks-frozen-assets You might be interested in this article.

[devere]

“The ecomony is headed for a disaster of biblical proportions, real wrath of God type stuff. Fire and brimstone coming down from the skies! Rivers and seas boiling! Forty years of darkness! Earthquakes, volcanoes...
The dead rising from the grave! Human sacrifice, dogs and cats living together... mass hysteria!”

Unfortunately there’s a 50-50 chance you’ve got it right.

[tapatio]

bookmark

[JSteff]

“Regardless, al-Qaeda has GOT TO BE loving it. “

They got what Osama wanted (collapse of US economy) and did not even have to crash any more jets into buildings.

Now how to explain it to all those would be martyrs?

[1066AD]

Mr Lee says the banking system in New Zealand and in Australia are in much better shape than the rest of the world.

They all say that - "we're OK it's those other guys that have problems" !
UK's been saying that for months, for example.

[Rte66]

Grab your coat and get your hat,
Leave your worries on the doorstep!
Life can be so sweet
On the sunny side of the Street ...

Can’t you hear the pitter-pat?
And that happy tune is your step
Life can be all reet
On the sunny side of the Street!

I used to walk in the shade,
With my blues on parade ...
Now I’m not afraid ...
This rover’s crossed over ...

If I never have a cent,
I’ll be rich as Rockefeller!
Gold dust at my feet ...
On the sunny, sunny side of the Street!

[Aggie Mama]

Actually, all this bad economy talk has me worried...but not just about the economy. What better way to really damage the US then to have terrorist attacks commence inside the US during this time? =(

[yorkie]

"What better way to really damage the US then to have terrorist attacks commence inside the US during this time?" Not a chance, with our closed and secured borders. /s

[nicmarlo]

Bear Stearns TOP INSTITUTIONAL HOLDERS

HOLDER
Shares       |  % Out   |     Value*         |   Reported

BARROW, HANLEY MEWHINNEY & STRAUSS, INC.
11,485,058   |   9.73   |   $1,013,556,368   |   31-Dec-07

MORGAN STANLEY
 6,335,729   |   5.37   |     $559,128,084   |   31-Dec-07

Legg Mason Capital Management, Inc.
 5,721,010   |   4.84   |     $504,879,132   |   31-Dec-07

PRIVATE CAPITAL MANAGEMENT, INC.
 5,541,259   |   4.69   |     $489,016,106   |   31-Dec-07

Barclays Global Investors UK Holdings Ltd
 4,245,451   |   3.60   |     $374,661,050   |   31-Dec-07

STATE STREET CORPORATION
 3,550,715   |   3.01   |     $313,350,598   |   31-Dec-07

VANGUARD GROUP, INC. (THE)
 3,149,691   |   2.67   |     $277,960,230   |   31-Dec-07

JANUS CAPITAL MANAGEMENT, LLC
 2,765,699   |   2.34   |     $244,072,936   |   31-Dec-07

FMR LLC
 2,359,011   |   2.00   |     $208,182,720   |   31-Dec-07

[varina davis]

Less anyone forget, it wasn’t FDR that saved the economy after the Great Depression, it was, sadly, WW II

[hiredhand]

How many times have I said that when this happens, it will happen at a non-linear rate? It's like the drop ratio of a bullet past mid-range trajectory....or if you will...the formula of the arc of a parabola.

...this ought to be "interesting" at a MINIMUM. ...if "intersting" is even the correct term for what we're going to get to witness.

[cherry]

"I’m going to get out early tomorrow morning so I can claim the best corner for my apple stand."

LOL...........

can I be next to you.....I shine shoes!

[Freedom4US]

Thankfully, I invested all my money in tulip bulbs so I’m sleeping soundly tonite.

[PghBaldy]

Bear S was involved with many hedge funds. One problem with letting an investment bank fail, is when assets are dumped at precisely the wrong time, one doesn’t get the best possible price (relatively speaking). Also, there is a fear that when the assets are priced at a new lower level, it forces more calls for collateral at other banks. It’s a rotten deal no matter what, but I believe it is better to “save” Bear by a merger than an out and out failure. I am not for corp welfare, but view the banks of various kinds to be special cases.

[yorkie]

This is just false reporting, I am sure. After all, President George W. Bush acknowledged here Friday that the U.S. economy is experiencing a tough time, but it will regain its strength in the long run because the “economic foundation remains solid.”

So. We are solid. Move along, folks. Nothing to see here.

[lainie]

Oh yes!

And there’s nothing wrong here that can’t be solved by printing mo’ money.

[solid foundation....good grief....]