According to documents released by the Federal Reserve, the emergency backing it provided to investment firms in March of 2008 was meant to prevent a financial "contagion" from infecting the entire market.Associated Press: Fed aided Wall Street to avert "contagion" June 27, 2008)
The Document
The widely reported reference to "contagion" appears in the following context:
- "Board members agreed that, given the fragile condition of the financial markets at the time, the prominent position of Bear Stearns in those markets, and the expected contagion that would result from the immediate failure of Bear Stearns, the best alternative available was to provide temporary emergency financing to Bear Stearns through an arrangement with JPMorgan Chase & Co., also in New York."FederalReserve.gov: Minutes of meeetings March 14 - March 16, 2008
Bear Stearns Contagion Blogs and Commentaries
- Google Blog Search: Bear Stearns Contagion
Why was Bears Stearns forced to merge with JP Morgan Chase?(1 Answer)
A:
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 ...
Why did credit default swaps grow so quickly in 2008?(2 Answers)
A:
It was a combination of factors. First of all, credit default swaps were an extremely lucrative business when everything was going ok. Who would have thought that Lehman ...
References
Fast Facts
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Emergency loans made to major investment firms
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Feared chain reaction from Bear Stearns bankruptcy
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