ding firms and dragged world markets with them.weighed that risk against the risk that their actions would create « ; moral hazard, » or greater willingness of companies to take inappropriate chances. The officials stressed that their efforts were meant not to save shareholders of Bear Stearns or any other company but to keep markets from collapsing .. P. Morgan Chase, one of the few Wall Street firms to receive only modest scars from the meltdown in the market for US mortgage loans and other debt, agreed to buy Bear Stearns just two days after making an emergency loan to the investment firm. Leaders at the Fed and the Treasury strongly encouraged the firms to execute the transaction - and to announce before Asian markets opened today - so that investors would be comfortable doing business through the company.welcomed the deal. «Last Friday, I said that market participants are addressing challenges and I am pleased with recent developments. I appreciate the additional actions taken this evening by the Federal Reserve to enhance the stability, liquidity and orderliness of our markets, » he said in a statement .. P. Morgan was happy to buy most of Bear, but wanted no part of its portfolio of complicated mortgage and other investments. Paulson and Bernanke were personally involved in the talks and told JP Morgan Chase executives that they could not buy just the most valuable pieces of Bear Stearns because there were global financial issues at stake.leaders, eager for the transaction to happen and wary of anything that would result in a fire sale of those risky assets, agreed to finance those assets and then sell them in an orderly way. In effect, the Fed has taken on the risk that these assets might be less valuable than anyone currently realizes.has been a remarkably fast fall for a titan of Wall Street. It took 85 years to build Bear Stearns and four days for it to dissolve. But the troubles for Bear Stearns may not be over. Shareholder lawsuits could be filed against the firm if investors suspect Bear Stearns officials knew Friday that bank »s value practically evaporated but failed to disclose that information publicly.trio of Fed actions aim to ensure that other top Wall Street firms do not experience a similar bank run.central bank will now make it possible for investment banks to borrow money as long as they put up collateral. The Fed in effect is offering to be a lender of last resort for 20 major Wall Street firms, a role it has previously played only for commercial banks.the central bank was created in 1913, it has served as a lender of last resort for ordinary banks, allowing them to post high-quality loans at a «discount window» in exchange for cash.night, it announced a new provision that will in effect do the same for major investment firms. Starting today, and lasting for at least six months, this new operation will allow «primary dealers,» which are 20 major Wall Street firms, access to cash in exchange for assets in which the market is not currently functioning.by lowering the discount rate, borrowing that money will be cheaper for both commercial banks using the discount window and investment firms using the new initiative.reduction in the discount rate - a quarter percentage point cut to 3.25 percent - will lower the rate banks are charged for emergency loans. That rate does not directly affect the cost for businesses and consumers to borrow money.five Fed governors voted unanimously to approve th...
