Ping!
Cue the “Aw Jeez” guy. :)
Thanks for posting this.
So we’re still all gonna die, right?
I read here on FR that JPM got $30 billion in free money hot off the Federal Reserve’s printing presses. Who to believe?
This is true because of the fact that any time a private entity needs a government loan guarantee, it means it cannot get a loan from the private sector. Of course, the main reason for a private entity not being able to get a loan in the private sector is because the private sector doesn't believe the entity is capable of paying back the loan (in a perfect world, at least).
Bear Stearns should have been allowed to collapse. The short-term economic pain would have been far less than the long-term economic pain we will now be enduring because we've decided to take the Soviet approach to bailing out failing companies.
It’s a semantic quibble. They bailed out the bond-holders, not the shareholders.
The simple answer is: yes.
Of course not.
The Fed attempted to bail out the US financial system.
Bear was taken out back and shot in the head.
The Fed is trying to keep the system liquid. They forgot this minor detail in 1929 and things didn't work out so good.
As a result, we ended up with Roosevelt, the New Deal and the welfare state.
The securities have no "face value". They previously had a higher market value, now have a lower market value, have a model value based on cash flows and expected defaults. But never had a "face value".
This reminds me of the old adage: no matter how thinly you slice it, it’s still baloney.
In answer to the question posed by the article, yes the Fed did bail out BSC. The typical bailout scenario is loan guarantees. I don’t recall a situation where the Federal government actually used direct payments to effect a bailout. Loan guarantees are what happened with the Chrysler bailout as well. Which, by the way, turned a nice profit for the U.S. Treasury.
But whether a bailout is ultimately profitable is not the point. The government has no place in acting as the insurer of last resort for ill advised investment strategies. The problem is that by acting in that role, you encourage future ill advised behavior.
To me, this article smacks of propaganda. The message being that this notorious example of corporate welfare in action wasn’t reallllly corporate welfare. I guess when $30 billion dollars is on the table, you can afford the services of a PR flack.
Interesting that posters come out of the woodwork to favorably spin this deal whenever it comes up. Makes you wonder at times how many paid bloggers are working FR.