Here is a link to the article:
http://www.smartmoney.com/bn/ON/index.cfm?story=ON-20080314-000984-1545
It prompted a couple of questions that I hope some other folks here can answer.
"JPMorgan will borrow funds from the Fed's Discount Window and re-lend them to Bear Stearns for 28 days, with the Fed bearing the risk of any losses. The size isn't predetermined, but is limited by the available collateral.
The arrangement employs a little-used Depression-era provision of the Federal Reserve Act. New York-based JPMorgan, unlike investment banks like Bear, has the advantage of being able to borrow directly from the Discount Window and, with just over $3 billion in write-downs thus far, has weathered the credit crisis far better than commercial banking peers like Citigroup Inc. (C). "
Question 1: Wasn't JP Morgan one of the individuals that lobbied heavily for the Fed, and participated in the secret meetings? Is this ability to absorb smaller, less favored banks (favored by Fed policy) one of the reasons the guys like JP Morgan wanted the centralization and control of the Fed in the first place?
""It's just pure fear across the board right now," said Geoffrey Yu of UBS. "All the promising news this past week has been undone over this Bear Stearns news....I don't think the market has seen anything of this magnitude before, such a big bank." "
Question 2: Haven't we indeed seen this level of banking distress before in the Great Depression and other runs on fractional reserve banks?
""The nature of financial companies is that they are pretty much a black box," says Jeff Houston, a bond fund manager at American Century Investments in San Francisco. "If people start to worry about what's in the box, there's not much the firms can do to demonstrate that they are not as weak as they appear to be." "
Question 3: Don't those who understand fractional reserve banking know what is in the "box"? Isn't it built in bankruptcy and fraudulant claims of holding money? Isn't what is happening to Bear Stearns the logical conclusion of fractional reserve banking? Is any bank today internally protected from a sustained demand for the funds they claim to hold for their depositors? Are there any businesses that offer 100% reserve banking services?
Maybe if some of the big boys go down people will wake up and realize they have been lied to and stolen from. I have been telling my friends about my concerns of depression for a couple of months now, and discussing the ABCT reasons why it has to happen. I have been showing them selected passages from Rothbard's AGD and saying "Look at what happened then - it is happening NOW!" Some of the more prudent have taken what steps they can to protect their financial positions. But some just think I am Chicken Little. I suppose time will tell, but I am really concerned that what I think is inevitably coming will bury us all...
One hundred trillion Zimbabwe dollar note