Fed acts Sunday to prevent global bank run Monday ( Bear Stearns Taken over,...rates cut )

MarketWatch ^ | 9:40 p.m. EDT March 16, 2008 | Rex Nutting, MarketWatch

[Ernest_at_the_Beach]

WASHINGTON (MarketWatch) -- Acting quickly to prevent a run on major global financial firms, the Federal Reserve cut its discount rate by a quarter percentage point to 3.25% and offered to lend money to a longer list of firms than ever before.

he extraordinary weekend moves came as J.P. Morgan Chase sealed a deal to buy Bear Stearns Cos. for just $2 a share backed by funds borrowed from the Fed. The Fed board gave its approval to that unique funding arrangement, which guarantees JP Morgan against losses from buying Bear. See full story.

The Fed board also approved the creation of a special lending facility through the New York Fed that would be available to members of its primary dealers list, which includes both commercial banks and investment banks. Investment banks, such as Bear Stearns, have not been allowed to borrow directly from the Fed.

JP Morgan has access to the discount window through its Chase Bank subsidiary, but Bear Stearns does not have direct access.

Events have unfolded at warp speed over the last week. On Tuesday, the Fed announced a new lending program for primary dealers in the bond markets, but that program won't go into effect for two more weeks. On Friday, the Fed allowed Bear Stearns to borrow money via JP Morgan in a desperate bid to save the firm, which has been pummeled by losses on exotic securities backed by subprime mortgages.

The Federal Open Market Committee meets on Tuesday. Analysts expect the FOMC to cut the target for the federal funds rate by as much as a full percentage point to 2%. Another cut in the discount rate is also likely.

[GAB-1955]

It happened in the 1970s, too. It's not like the Japanese can take physical plant and real estate out of the United States. There's no real problem.

[rumrunner]

I’m all cash in my Fidelity account, but it’s held in a money market fund (FDRXX). Now I’m starting to worry that this may not be safe enough...things have moved so fast.

[STONEWALLS]

“”The first rule of bank runs: get there first.”

.....that’s the truth....when my old bank failed it went like this:

1.on Monday some customers started lining up to withdraw their money and it made the evening news....my wife says “maybe we ought to get our money out”....I said “don’t be silly; this ain’t the Depression”....famous last words!

2.on Tuesday the line at the bank was around the block...that made the evening news too.

3.on Wednesday the bank send for an armored car full of cash from the federal reserve to try and stem the flow.

4.on Thursday fist fights broke out in the bank’s lobby.

5.on Friday the bank did not open.

MORAL:
1.listen to your wife.
2.no bank can weather a run.
UPSHOT
1.little guys like me got reimbursed in full by the Fed.
2.big guys got $100,000 and an IOU for the rest when the bank’s assests were sold....ended up at 11 cents on the dollar.

[AmericanInTokyo]

You certainly have the “MORALS” in the right order there!

[Wally_Kalbacken]

Do not locate yourself below the swan diving brokers!

[Digger]

BAILOUT. Do we really want the Federal Government to be the backstop for every (major and minor) financial downfall in our country? Just wondering here.

Next you will be called a corporate racist for asking a question. PC in the "21st Century Dark Ages".

[grey_whiskers]

JPM Chase now makes good on those obligations and all Bear shareholders lose everything.

Except the C-level execs who probably get golden parachutes.

Cheers!

[Biblebelter]

That’s what I’m talkin’ about. Can you imagine those guys that bought Bear Stearns thinking it near the bottom when the Feds stepped in, only to find out that their 1,000 shares at $30 are now worthless 1 day later? Whoo boy. There will be blood!

I have read that most brokerages did not have any shares available for shorting on Thursday or Friday. That puts some real light on Thursday's and Friday's volume. There were some people who may have made some good money trading BSC on Friday, but it was pure sucker money if they were holding at the end of the day.

[grey_whiskers]

I’m going to get out early tomorrow morning so I can claim the best corner for my apple stand.

Apples? I'm going with CONDOMS.

(Think about it...)

Cheers!

[Ruy Dias de Bivar]

***The dead rising from the grave! Human sacrifice, dogs and cats living together... mass hysteria!***

Is it too late to invest in Dutch Tulips?

[Lijahsbubbe]

You know you are right, but those new Cheezits Stiks are MAHVALOUS!!

LOL. Thanks for the heads up. I'm always looking for new and different ways to add pounds! ;)

[grey_whiskers]

I’m going to get out early tomorrow morning so I can claim the best corner for my apple stand.

Apples? I'm going with CONDOMS.

(Think about it...)

Cheers!

[HeartlandOfAmerica]

Do not locate yourself below the swan diving brokers!

No intention of that buddy. This is gonna be pretty horrible I think.

The Fed announcing a quarter basis point cut in interest rates on a SUNDAY NIGHT because they couldn't wait two stinkin days for their scheduled meeting?

Stearns losing billions in literally a FLASH?? Bank customers have to have a warm and fuzzy feeling right about now. How many bought BS shares last week and have literally thrown their money away? So the Fed HAS to guarantee that JP Morgan won't lose anything on the deal???

THEY'RE panicked and I think that others are gonna see that as readily as I do and THEY'RE gonna panic as well. Watch the stampede.

[Gritty]

Me?

I'm headed to ALDI tomorrow to buy rice and beans.

I can buy 6 cans of peas for the price of a Bear Stearns share of stock. What a bargain! Last year I could have bought 500 cans for the same share of stock.

But, better late than never. Next month I will be able to only buy one can...

[Lijahsbubbe]

Apples? I'm going with CONDOMS.

(Think about it...)

Hmm. I'm going to one-up you here and go with hard liquor.

[anymouse]

I’m going to get out early tomorrow morning so I can claim the best corner for my apple stand.

When Black Friday comes
I'll stand down by the door
And catch the grey men when they
Dive from the fourteenth floor ...

[grey_whiskers]

Just my luck. I gave up alcohol *and* chocolate for Lent.

And Easter is *next* Sunday.

I is gonna dip my chocolate Easter bunny into my Guinness, that's what I'm gonna do.

No cheers, unfortunately.

[grey_whiskers]

Mr Lee says the banking system in New Zealand and in Australia are in much better shape than the rest of the world.

That's because they are selling commodities *to* China, not just buying Wal*Mart Sh*t *from* China.

D* Y*u see st*rs?

Cheers!

[farlander]

In other words... time to invest.

[JSteff]

Uhmmm why would anyone on FR want to look at a page of Japanese characters?

Just curious.