Fed Feared 'Contagion' If Bear Failed

Bernanke and crew felt they had to act, minutes show

By Kevin Spak, Newser Staff

Posted Jun 27, 2008 1:30 PM CDT

(Newser) – If the Fed hadn't taken the unprecedented step of helping bail out Bear Stearns, a sweeping "contagion" would have doomed the markets, its members say. In newly released minutes from its March 16 meeting, the Fed reasons that the “prominent position of Bear Stearns” left it no choice but to help JP Morgan's purchase, the Wall Street Journal reports. The minutes also reveal that JP Morgan was not the sole suitor—only the “most suitable,” and that fewer than five board members were in on the decision.

"The evidence available to the Board indicated that Bear Stearns would have difficulty meeting its repayment obligations the next business day," the minutes say. "Significant support, such as an acquisition of Bear Stearns or an immediate guarantee of its payment obligations, was necessary to avoid serious disruptions to financial markets."

In an April 11, 2007, file photo Federal Reserve chairman Ben Bernanke gestures as he answers students' questions at New York University's law school in New York. (AP Photo)

In this June 4, 2008, file photo Federal Reserve Chairman Ben Bernanke listens to other speakers before he delivering the Harvard Class Day Speech. (AP Photo/Josh Reynolds, File)

In this April 3, 2008, file photo, Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington. (AP Photo)

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Fed Feared 'Contagion' If Bear Failed

Bernanke and crew felt they had to act, minutes show

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Feds, Banks Seek Lehman Deal by Tonight

BofA, Barclays balk at bad assets, but bailout not in the cards

Fed, Execs Defend Bear Bailout

Collapse would have spread throughout economy, they argue

Congress to Grill Bernanke on Bear Stearns

Questions will likely focus on timing and intensity of Fed's actions in brokering deal

Bernanke Tosses Out His Rule Book

As Wall Streets meltdown accelerates, the Fed chief adapts on the fly

Foreign Banks Got Majority of Secret Fed Loans

Court forces Fed to release info

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Fed Feared 'Contagion' If Bear Failed

Bernanke and crew felt they had to act, minutes show

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OTHER STORIES ON OUR RADAR

Ben Bernanke • Federal Reserve • Bear Stearns • financial markets • financial crisis

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

Feds, Banks Seek Lehman Deal by Tonight

BofA, Barclays balk at bad assets, but bailout not in the cards

Fed, Execs Defend Bear Bailout

Collapse would have spread throughout economy, they argue

Congress to Grill Bernanke on Bear Stearns

Questions will likely focus on timing and intensity of Fed's actions in brokering deal

Bernanke Tosses Out His Rule Book

As Wall Streets meltdown accelerates, the Fed chief adapts on the fly

Foreign Banks Got Majority of Secret Fed Loans

Court forces Fed to release info

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?