Bernanke claims Fed had no advance warning of Bear Stearns
Posted on April 2nd, 2008 by bile Categories and Tags: Uncategorized, bailout, bank examiners, Bear Stearns, Ben Bernanke, Bush administration, Congress's Joint Economic Committee, conspiracy, corporatism, economics, fascism, Federal Reserve, Federal Reserve System, fucking retarded, J.P. Morgan, JP Morgan Chase, nanny state, politicsThe Federal Reserve did not have any advance warning of the impending financial collapse of Bear Stearns (NYSE:BSC) , but now has examiners onsite at investment banks to evaluate their capital situation and potential risks, Fed Chairman Ben Bernanke told Congress’s Joint Economic Committee this morning.Bernanke said the first notification was on the morning of Thursday, March 13 that the liquidity position of the company had deteriorated drastically and that it would file for Chapter 11 bankruptcy reorganization the next morning unless some financing was arranged.
The Fed and Treasury arranged 30 bln usd of financing through JP Morgan Chase. ‘We did not bail out Bear Stearns,’ Bernanke told the committee. ‘We did what we did because it was necessary to maintain the integrity and viability of the financial system.’ While Bernanke said the actual financial risk to the Fed in taking on suspect securities as collateral for the loan was nowhere near the potential 29 bln usd now on its books (JP Morgan would take the first 1 bln usd of any losses), he also told the committee: ‘I’d hope not to ever do it again’.
Because the Fed has now opened up its discount window for direct lending to investment companies as well as banks, the Fed now has its bank examiners on site at the investment companies to assess their financial positions and Bernanke said he did not expect another Bear Stearns-type situation to occur.
I don’t doubt they didn’t realize that Bear Stearns was in trouble till that Thursday but they should have known something like that was likely to happen. Bernanke could have ratched down the interest rates slowly starting 6 months ago but if he had the market would have dived because it would have meant there was suspicion of a problem. Which would have been accurate and a dive at that point would have likely been nothing in comparison to what we have now. Several things really frighten me about all this. 1. The opening of the loans to investment firms creates a whole new level of central control corruption. 2. The word has come out that they have been planning to do that since last year. 3. “We did not bail out Bear Stearns.” Bullshit. bailout: A situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business’s downfall. Bailouts can take the form of loans, bonds, stocks or cash. They may or may not require reimbursement. 4. ”We did what we did because it was necessary to maintain the integrity and viability of the financial system.” This shows how fragile things are. If a single company failing can cause the public to lose faith in the entire financial system sounds to me that system deserves it. 5. From what I’ve gathered the Fed had offered loans to the investment firms before Bear Stearns had bad problems so why didn’t they take out a loan from the Fed to cover their position? Why did the Fed supposedly push so hard for the $2 a share deal and get pissed at the $10 a share deal? Something happened behind the scenes we don’t know about and even though Ben “hope[s] not to ever do it again” I think we are more likely to head toward the Nordic system the Bush administration was talking about then go back to a freer economy based on personal responsibility and honest money.
