Bear Stearns was just hours from collapse, and letting it go down would have been disastrous, executives and regulators argued on Capital Hill today while defending the controversial bailout, the New York Times reports. Without the takeover, “we would all be facing a far more dire set of challenges,” said JPMorgan CEO James Dimon, citing the possibility of a mass run on other investment banks.
New York’s Fed president recalled getting an evening call from the SEC, saying Bear intended to declare bankruptcy the next morning. “We judged that a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences,” he said, explaining the swift bargaining process that brought about the Fed-backed takeover. Lawmakers have attacked the bailout as a “moral hazard.”