From Marketwatch:

J.P. Morgan Chase & Co. is buying battered broker Bear Stearns Cos. for $236 million in a Federal Reserve-backed bailout unprecedented in scope and execution.

The Federal Reserve, which cut the discount rate in a coordinated move with its announced backing of the deal Sunday evening, is taking the extraordinary step of providing special financing in connection with this transaction.

The Fed has agreed to provide financing of up to $30 billion of less-liquid assets held by Bear Stearns. Roughly $20 billion of that funding will back mortgage securities.

…

The deal offers Bear Stearns investors $2 a share — a massive discount to the firm’s closing price of $30 on Friday. A week ago, the stock was trading above $60 and a year ago it was at more than $150.

This move by the Fed is an affront to capitalism.  Risks should come with the potential for both rewards and consequences.

I don’t see how any good can ultimately come from the quasi-public Fed buying lousy mortgages and putting taxpayers on the hook when they go into default.

• A bad deal just got worse
• What I said, only way better
• Obama’s financial dealings
• George Will on the mortgage crisis
• Market correction or reaction to The Maestro?

This entry was posted by Brian on Monday, March 17th, 2008 at 8:09 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.