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.

[Travis McGee]

Yep, they’re going to try to monetize all of the bad debts.

IOW, put it on our grandkids’ tab.

[nicmarlo]

Symbol	  Name	            Last Trade        Info
BSC   BEAR STEARNS COS THE  3.59 12:05PM ET   Down 26.41   (88.03%)   96,025,605	
LEH   LEHMAN BROS HLD      28.43 12:05PM ET   Down 10.83   (27.59%)   88,697,355	
C     CITIGROUP INC        18.39 12:05PM ET   Down 1.39    (7.03%)    86,646,799	
JPM   JP MORGAN CHASE CO   39.63 12:05PM ET   Up 3.09      (8.46%)    64,241,753	

[nicmarlo]

Their policies are insane.

[Content Provider]

I wonder why?

[nicmarlo]

12:25 pm : The major indices are posting steep losses. The
S&P 500 and the Nasdaq have fallen to fresh session lows.
Seven of the ten sectors are posting a loss of more than 1%.

http://finance.yahoo.com/marketupdate?u

[nicmarlo]

[Petronski]

Don’t forget the rabbits with big nasty teeth.

[NaughtiusMaximus]

Watch out for all those stockbrokers in their three-piece suits jumping out of the skyscrapers, the bums & hobos panhandling, and all the out-of-work men in the soup lines. Hey! Maybe we can get on with the CCC for $1.00 a day!We'll do really well in the CCC, even at $1.00 a day, as long as we can control the floating crap games. :)

[DuncanWaring]

Looks like you were off by about five points.

[garbanzo]

I meant to say the Dow would close up by *at least* ten points... :)

[DuncanWaring]

Well then, I guess you were dead-on.

Congratulations on becoming my new financial advisor. ;-)

[DWC]

Sorry I’m late. What fell?

[AndyJackson]

The sky (joke). Certainly the ceiling on the house of BSC.

[DWC]

I think two bucks is rather cheap for bear sterns. Maybe people were talking about the Japanese exchange,instead of the djia. I’m referring to the sky falling.