Bear Stearns Bailout

[kandrathe]

I've been thinking about the economy, and we all may have been. I'm struck by the almost total silence that has surrounded the bail out of Bear Stearns, with a Federal Reserve brokered deal to have JP Morgan Chase cover their bad debt. Had Bear Stearns been allowed to fail, there would have been massive suffering and the house of cards we call our international monetary system would have come crashing down.

The Federal Reserve issued a non-recourse loan of $30 billion in order to cover losses in Bear Stearns' investments in mortgage-backed securities and exotic investment paper, with collateral to be managed by BlackRock. Federal Reserve Chairman Ben S. Bernanke testified before the Joint Economic Committee of the U.S. Congress that there most likely would have been "severe consequences" to the default of Bear Stearns, leading to a possible systemic financial crisis. Many viewed the Federal Reserve's actions as a government bailout of an investment bank. One week later, JP Morgan Chase increased the value of its purchase stock swap from $2.00/share to $10.00/share and reduced the loan from the Fed by $1 billion. Wikipedia

Here is when sheep and shepherd make sense. Most of the sheep in the world don't have a clue about what is really happening, and probably could care less until they find themselves starving in the street. Here is an obvious example where the wealthy individuals who control the government, and the world monetary policy converge to steer the economy away from the cliff, and few people on the bus even take notice.