More questions about JPM and Bear Stearns

Federal Reserve Bailout of Megabank Raises Serious Questions About Motive

By Dr. Mark W. Hendrickson, AmericanFreePress.Net, May 26, 2008

The Federal Reserve crossed a Rubicon of sorts, lending tens of billions of dollars, not to a commercial bank, as has been its historical practice, but for the first time to an investment bank.

Commercial banks pay the Federal Deposit Insurance Corporation (FDIC) for deposit insurance, whereas investment banks do not, and yet the Fed suddenly made liquidity available to the latter. Commercial banks are legally allowed to use leverage to a maximum ratio of $13 of debt to every dollar of equity, whereas investment banks—ironically subject to less regulatory oversight than commercial banks—can leverage their equity by a factor of 34.

Invoking an obscure, never-before-used legislative provision, the Fed made billions of dollars available to JPMorgan Chase to acquire another investment bank, the essentially insolvent Bear Stearns.

The Fed-engineered JPMorgan takeover of Bear raises startling questions: What is the degree of cooperation between the Fed and JPMorgan? Was this an impromptu alliance, or had it been plotted in advance? Was JPMorgan drafted against its will to absorb Bear Stearns, or did the central bank give JPMorgan a plum that it already coveted? More importantly for the country, what will be the relationship of JPMorgan and the Fed going forward?

Clearly, if Bear was “too big to fail,” then undoubtedly the much larger JPMorgan is too big to fail. JPMorgan was already a key dealer of U.S. government debt before absorbing Bear, and now it has Bear’s erstwhile share of that operation, too. Of even greater significance, even before the takeover, JPMorgan already had multiples of the kind of illiquid financial derivatives that did in Bear Stearns—in fact, more derivatives than any other company in the world—and now it owns Bear’s junk, too. This implies that the Fed will have to make good on those derivatives—even if it eventually means giving JPMorgan real money for worthless “assets”—if that’s what it takes to keep JPMorgan alive. . . .

Continued here: http://www.americanfreepress.net/html/federal_reserve_bailout_raises.html

2 Responses

  1. Perhaps we should not be so surprised by this move. According to both Ellen’s book, and G.E. Griffin’s The Creature from Jekyll Island, JPMorgan IS one of the consortium banks that OWNS the fed. Is it not the same as the eariler consolidation that led to there being just three big banks? “Bear Sterns is too big to fail. So we’ll lend ourselves the unexisting money to buy it ourselves. So that it can’t fail.” It’s utterly absurd. But it’s no more absurd than any other part of the system so why nit-pick? 😉

    Just out of interest Ellen, having mentioned ‘The Creature from…’, and given Griffin’s account of the [popular] NWO theory, what’s your take on that?

    One of the strengths of The Web of Debt is that it doesn’t hard sell any particular worldview, and doesn’t engage in any unsubstantiated speculation, so I can understand if that’s not really a topic you address.

  2. Yes, I agree; JPM ate Bear Stearns for lunch. Actually it needed the money it got from the Fed to stay out of bankruptcy itself. The goal though is to take over the banking industry and the money system under a single private master-spider head. The NWO is the global effort along the same lines; that’s my opinion. Thanks for the comment, Ellen

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