In the New York Times, Andrew Ross Sorkin makes a big deal of the fact that the Fed seemed to be putting its muscle behind the Bear Stearns Cos. "bailout." (Once the price moves from $2 to $10, the term "bailout" creeps into the lexicon again.) Well, what did you expect? It was pretty obvious the Fed was behind the curtain from the start, as evidenced not only by the original $30 billion backstop (now a mere $29 billion) but because it's J.P. Morgan Chase & Co.'s main regulator. There's a complicated quid pro quo between the Fed and Morgan that firms like Bear utterly lack.
The trouble is, by re-cutting the Bear deal, the Fed now wades ever-deeper into a quagmire of clashing interests -- Bear shareholders, J.P. Morgan, Wall Street, anti-Wall Street, the let-the-market-decide crowd, the-save-the-mortgage-holders lobby, the federal versus state (meaning Delaware) regulatory debating society, congressmen trying to decide which crowd to join -- as it searches for some elusive definition of "national economic interest." Geeze, it begins to sound like stakeholder theory is alive and well. Recall, of course, that the Fed's foundational mandate -- and the reason for its independence -- is sound money, translating normally into controlling inflation. We're a long, long way from Kansas, Dorothy.
One last point: You can blame the Fed, as Sorkin did (while taking it back in a parenthetical admitting there wasn't much choice, a device that crops up in many examples of punditry on this subject) for being manipulative as it tries to save the world, but who was ready, and able, to act? The answer, of course, is no one. But once the Fed moved -- the rest of officialdom and the commentariat watching slack-jawed -- the politics could begin in earnest. - Robert Teitelman
See story from The New York Times
See story about Bear Stearns deal from TheDeal.com
See Bear Stearns Dealwatch
Comments
nobody talkes aboute the fact that leh got funding from the fed without being taken over by jpm why?