Yeah, but Bernanke wants someone to take the fall.
Bear Stearns says crisis might have been avoided if Fed window opened earlier
April 03, 2008: 02:49 PM EST
WASHINGTON, Apr. 3, 2008 (Thomson Financial delivered by Newstex) -- The president of Bear Stearns (NYSE:BSC) told Congress today that he does not believe the company would have had to be saved from near bankruptcy if the Federal Reserve Board opened its discount window to non-banks earlier than it did.
The Fed on March 14 agreed to open discount window lending to non-banks in response to the run on Bear Stearns that began earlier that week. As New York Federal Reserve Bank President Tim Geithner said today, that emergency access to credit was not enough to calm the market, and just a few days later Bear Stearns had to be rescued by JP Morgan Chase and the Fed.
But today, Bear Stearns President Alan Schwartz argued that opening the discount window earlier, and to all non-banks, would likely have prevented Bear Stearns from having to be bailed out. He said it is 'highly highly unlikely' that Bear Stearns would have to be rescued if the window were opened earlier, and said part of the problem is that the window was just opened for a single entity, which made the situation look worse for Bear Stearns.
'When you make an emergency situation available for one particular bank, that does not shore up confidence in that particular bank,' Schwartz said.
Earlier at the same hearing, Geithner said he doubted that opening up the discount window earlier would have helped, and Fed Chairman Ben Bernanke agreed.
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