The Federal Reserve has offered a peek at just what went on during
those two days in March as it was devising a way to bail out Bear Stearns Cos. The minutes of the meetings, dated March 14 and March 16 and
released Friday, reveal the details of the Fed
plan to backstop the deal allowing J.P. Morgan Chase & Co.
to acquire Bear Stearns to save it from complete collapse.
Continue reading below
"Given the unusual and exigent circumstances," the Fed said it would support "a nonrecourse loan of up to $30 billion" to support the deal, which was
announced March 16. At the time, J.P. Morgan agreed to acquire Bear Stearns for a mere $2 per share.
The minutes note: "Although many potential investors had been invited to invest, Bear Stearns had determined that JPMC was the most suitable bidder."
Without the offer, it was clear that Bear Stearns, once the world's fifth-largest investment bank, would not survive its liquidity crisis without help. Trouble had been brewing at the bank since two of its hedge funds collapsed last summer, leaving it exposed to the credit crisis.
J.P. Morgan, however, subsequently
raised its offer for the bank to $10 per share, or about $1 billion -- still, a far cry from the $67 per share at which Bear Stearns was trading just two weeks before the acquisition announcement. -
Donna BlockSee minutes from the Fed meetings
