In 2008, when the big banks were to collapse in US, there were meetings which take place in the Federal Reserve’s building in New York. These meetings were attended by the Federal Reserve, the bank in danger (Bear Stearns) and the banks with cash (JP Morgan) which could bail out the bank needing to be roll over.
The banks had been creating debt and selling debt. These speculators, bankers and layers make money on fees when selling or buying these debts created.
(See the video from the 23:55 minut to 25:55 minut. Film: WALL STREET: MONEY NEVER SLEEPS part 2. 2010)
-China is out. Two months we negotiated with these pikers . They pull out at 7 p.m. so what is new? They are Chinese.
-So you are saying you don’t have an out.
-No. I’m saying, just give me one week.
-Lou, we have heard this before.
-Jesus. Paul, we lost billions this week. If the markets don’t roll over our paper Sunday night, before Asia opens, Keller Zabel cannot do business on Monday.
-Lou, you understated the scale of your bad loans. Your valuations are no longer believable.
-After all these years, you say this to me? Three-quarters of the banking houses at this table are holding the same paper, and you’re gonna let Keller Zabel fail? You’re all committing suicide.
-What do you say, Harry? Will you come in on this?
-Look, if you want us to bail out Keller Zabel, all of us will have to participate. And we will need substancial guarantees from the US Treasury.
The Federal Reserve’s building © Images. https://investorsconundrum.com/
“Today, JPMorgan Chase & Co announced that, in conjunction with the Federal Reserve Bank of New York, it has agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days. Through its Discount Window, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase. Accordingly, JPMorgan Chase does not believe this transaction exposes its shareholders to any material risk. JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company.”
“The Bear Stearns Companies Inc. announced today it reached an agreement with JPMorgan Chase & Co. (JPMC) to provide a secured loan facility for an initial period of up to 28 days allowing Bear Stearns to access liquidity as needed. Bear Stearns also announced that it is talking with JPMorgan Chase & Co. regarding permanent financing or other alternatives. Alan Schwartz, president and chief executive officer of The Bear Stearns Companies Inc., said, “Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity. We have tried to confront and dispel these rumors and parse fact from fiction. Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations.”