On March 14 came from Bear Stearns, the investment bank the fifth largest in the United States over a period of insolvency. As a growing lack of trust in society has increased the SOA subprime exposure, other banks eventually refused to touch the company which has existed for over 85 years as a loan.
Had to borrow Bear Stearns a commercial bank, (ie institutions, money that people or companies) may, ultimately, the Federal Reserve, called SOA Äúdiscount window, the benefit thus received a loan State of the lowest prices available.
The reasoning behind the granting of loans to private companies is in good health, because public confidence in banks is much stronger. But also to extend for obvious reasons, the definition kan Discount Window institutions that take risks in their business because they have less or no accountability to taxpayers.
But after Bear Stearns was on the verge of collapse, everything has changed. Bear Stearns share began to falter as investors fled. The Fed action was decisive in beleaguered bank by securing a loan of $ 30000000000 One of its major competitors, JPMorgan Chase, so that they can buy without fear BS to acquire dangerous subprime mortgage debt.
In fact, the government has bought a troubled investment bank for pennies on the dollar, (their first offer was $ 2 per share, BS when traded to a high of $ 170 a year to know) that the taxpayer pays for the entire account, even walking. At the same time the Bush administration has argued that no government bailout would be extended to the financial sector.
Also recorded both on the fire sale of wealthy shareholders of BS on their investments that the Fed is under pressure from potential litigation, quintupled its offer of BS, to $ 10 per share. This means that even if the potential losses that are experienced by millions of taxpayers (many of whom risk losing their home to closing) when the profits reaped by managers zijn zeker bij JPMorgan.
Even with its exceptional exposure to subprime securities, BS is still worth more than one billion dollars U.S.. Profit-taking was the name of the game in the wake of the announcement that the quantities of day traders large quantities of shares to SB $ 2 or $ 3 per share is sold, and increased after submission. Taking responsibility for the BS on the Fed, the price of America, AOS changed financial future.
By ensuring the discount rate to BS, they implicitly must be able to do so for other investment banks in trouble in the future, the more money tax loss Wall Street absorption without sufficient perspective implied banks . If the Fed intended, with the banks on the economy struggles with recession, the policy clearly a very different view of finance, when the Federal Reserve in 1913, then a real discount vensters you use for your bank has been able to stay awake.
However, it seems, is the safest facilities separate economic security of most average American lives. Politicians who resonance growing populist messages identified in the current climate are convinced that the agreement to an important issue