On 14 March Bear Stearns, fifth investment bank in the United States, facing a severe liquidity crisis, appealed to the Federal Reserve. In order to save the bank after its battering by the subprime crisis, the Federal Reserve lent $30bn to JPMorgan Chase, which announced two days later that it was buying Bear Stearns for $236m.
This rescue was unusual, if not shocking. Until then, government-engineered rescues had only taken place when deposit-taking institutions were at risk and the Federal Reserve only provided liquidity for commercial banks. Bear Stearns was an investment bank which did not take deposits from the public and had made reckless business decisions. Furthermore, the provision of public funds to JPMorgan Chase allowed it to swallow the bank for a pittance. Before the bailout, Bear Stearns shares traded at $31, yet they were acquired for only $2 a share (although that figure was multiplied by five a few days later). In the words of New York Democratic senator Charles Schumer: "When you're looking into the abyss, you don't quibble over details."
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