2 years, 10 months ago
Why was Bears Stearns forced to merge with JP Morgan Chase?
Fast Facts:
1. JP Morgan was perceived as the lender of last resorts
2. The Fed desired to avert a financial meltdown and propped up the stock market by increasing liquidity and cut interest rates.
3. Bear Stearns had an investment bank to fund them, but a run on the bank caused a massive panic.
4. The Fed loaned Bear Stearns $30 billion, however, $13.4 trillion was being leveraged by $80 billion. The derivatives market was $43 trillion.
5. JP Morgan buys Bear Stearns for $2 a share and becomes a $90 trillion derivatives king.
Why do you think Bear Stearns was forced to merge?
What role did Bear Stearns play in the securities repurchase market?
1. JP Morgan was perceived as the lender of last resorts
2. The Fed desired to avert a financial meltdown and propped up the stock market by increasing liquidity and cut interest rates.
3. Bear Stearns had an investment bank to fund them, but a run on the bank caused a massive panic.
4. The Fed loaned Bear Stearns $30 billion, however, $13.4 trillion was being leveraged by $80 billion. The derivatives market was $43 trillion.
5. JP Morgan buys Bear Stearns for $2 a share and becomes a $90 trillion derivatives king.
Why do you think Bear Stearns was forced to merge?
What role did Bear Stearns play in the securities repurchase market?
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M$1 Answer
because it would have otherwise filed for bankruptcy which forced it to merge because otherwise the firm would have ceased to operate...they were a top 10 player in the securities repurchase market but disproportionately high participant in the mortgage securities repurchase market
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M$
Looking back, should Bear Stearns been forced to bankrupt?