"Too Big to Fail"
You'll be hearing a lot of that in the next weeks, months and years.
Fannie. Freddie. Lehman. Washington Mutual. Countrywide. IndyMac. Ambac. Sallie Mae. FHLB. Pulte. BofA. Wells Fargo. Merrill Lynch. Goldman Sachs. Hell even Home Depot. Too big to fail. Big Daddy Government will be there for you, dishing out trillions to keep the Big Lie alive.
Here's Helicopter Ben today, telling the world what we already knew. The US government will be bailing out stupid companies who made stupid decisions that were run by stupid and corrupt managers because the stupid taxpayers and stupid media do nothing to stop them. Northern Rock and Bear Stearns were nothing. Just wait.
On March 13, Bear Stearns advised the Federal Reserve and other government agencies that its liquidity position had significantly deteriorated and that it would have to file for Chapter 11 bankruptcy the next day unless alternative sources of funds became available.
This news raised difficult questions of public policy. Normally, the market sorts out which companies survive and which fail, and that is as it should be. However, the issues raised here extended well beyond the fate of one company. Our financial system is extremely complex and interconnected, and Bear Stearns participated extensively in a range of critical markets.
With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence. The companys failure could also have cast doubt on the financial positions of some of Bear Stearns thousands of counterparties and perhaps of companies with similar businesses.
Given the current exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain. Moreover, the adverse effects would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability.
To prevent a disorderly failure of Bear Stearns and the unpredictable but likely severe consequences of such a failure for market functioning and the broader economy, the Federal Reserve, in close consultation with the Treasury Department, agreed to provide funding to Bear Stearns through JPMorgan Chase. Over the following weekend, JPMorgan Chase agreed to purchase Bear Stearns and assumed Bears financial obligations.