The JP Morgan-Bear Stearns story.

May 2008


The Secret Bailout of J. P. Morgan: How Insider Trading Looted Bear Stearns and the American Taxpayer

Ellen Brown

The “rescuer” was not actually JPMorgan but was the Federal Reserve, and the party “rescued” was not Bear Stearns, which wound up being eaten alive. The Federal Reserve (or “Fed”) lent $25 billion to Bear Stearns and another $30 billion to JPMorgan, a total of $55 billion that all found its way into JPMorgan’s coffers.

The deal was also a very bad one for U.S. taxpayers, who are on the hook for the loan. The loan for the buyout was backed by Bear Stearns assets valued at $55 billion; and of this sum, $29 billion was non-recourse to JPMorgan, meaning that if the assets weren’t worth their stated valuation, the Fed could not go after JPMorgan for the balance. The Fed could at best get its money back with interest; and at worst, it could lose between $25 billion and $40 billion.

Why did the Fed not just make the $55 billion loan to Bear Stearns directly?

John Olagues maintains that the Bear Stearns collapse was artificially created to allow JPMorgan to be paid $55 billion of taxpayer money to cover its own insolvency and acquire its rival Bear Stearns, while at the same time allowing insiders to take large “short” positions in Bear Stearns stock and collect massive profits.

Read on.