"The securities backing a $29 billion [Fed] loan to Bear Stearns Cos. consist primarily of 'mortgage-backed securities and realted hedge investments.' the Treasury Department said. ... The Fed has declined to provide any underlying detail so far", WSJ, 2 April 2008.
"The government sought a low sale price for Bear Stearns Cos. to send a message that taxpayers wouldn't bail out firms making risky bets, a top Treasury Department official testified, as regulators offered Congress the first detailed explanation of the unprecedented rescue. ... 'This would have been far more, in my opinion, expensive to taxpayers had Bear Stearns gone bankrupt and added to the financial crisis we have today,' said J.P. Morgan chief executive James Dimon. 'It wouldn't have even been close.' ... Since the [Fed] made the deal possible with a $30 billion loan, critics have questioned whether the government was creating 'moral hazard'--encouraging Wall Street firms to take big gambles on the assumption that they could get a taxpayer-funded rescue if the bets went sour. ... 'There was a view that the price should not be very high or should be towards the low end ... given the government's involvement,' Treasury Undersecretary Robert Steel told a congressional committee during a five-hour hearing Thursday. ... Steel and other officials told the Senate Banking Committee that they didn't dictate the precise sale price, but wanted to see a deal done quickly to avoid a sudden market-shaking crash of the company. ... Officials rejected lawmaker's suggestions that they bailed out Bear Stearns, noting that shareholders took steep losses and many employees may lose their jobs. But under questioning, Mr. Bernanke agreed with a lawmaker who suggested that the Fed rescued Wall Street more broadly. 'We only allow sound institutions to borrow against collateral,' [Timonthy Geithner, NY Fed Head] said. 'I would have been very uncomfortable lending to Bear Stearns given what we knew at that time [March 16].' Dimon said the $2 figure was not based on the value of Bear Stearns, but 'was based on what protecting the downside' that J.P. Morgan faced. ... Dimon said ... the assets tied to the Fed's $30 billion loan were not Bear Stearns 's riskiest holdings", my emphasis, WSJ, 4 April 2008.
"The [Fed] has agreed to temporarily relax some rules about transactions with affiliates to make it easier for J.P. Morgan Chase & Co. [JPM] to complete its planned acquisition of Bear Stearns Cos. ... The goal is to prevent problems at the affiliates from endangering the bank's depositors. ... The exemptions will make it easier for [JPM] to provide liquidity to Bear Stearns and will also keep [JPM] from having to raise capital quickly after the merger. ... The approval was conveyed to [JPM] in a letter to the firm's associate general counsel posted on the Fed's Web site. The exemption will be phased out gradually and expire on Oct. 1, 2009, the Fed said", WSJ, 5 April 2008.
Note Richard Fisher (RF) says perceptions of what the Fed is doing "to be the paramount risk to the ... U.S. economy", not what the Fed is doing. I do not apologize, RF for my ignorance. I only know who gains from Fed policies and who loses. Anyone who read My Weekly Reader in the 1950s could tell you: Wall Street gains and savers lose. I don't know what the term "U.S. economy" means, it's just emotive rhetoric. As Barron's told us in 1979, "How do you know when the Chairman of the Fed is lying? Answer: every time he moves his lips". Et tu RF? Leona Helmsley is supposed to have said, "We don't pay taxes. Only the little people pay taxes". Similarly, obeying any law is only for politically disfavored classes. Attorney General Michael Mukasey, did you look at the Fed's actions to see if they are legal? Did you know that "hasty" actions are a "badge of fraud"? Ask any bankruptcy law judge.
Dunkelberg sees the Fed the same way I do. It's actions are really that simple to understand.
I ignored the details of the Fed's TAF, TSLF, etc., actions. Why? Because they don't matter! The Fed will do whatever it has to do to protect those Wall Street houses it decided to protect. Period. Steve Waldman has a nice comment on the Fed's actions at http://www.interfluidity.com/, on 3 April 2008. It's comment 11 to this post. As to the Fed easing rules, no. There are no rules. I remember a line from "Blazing Saddles", 1974, "Badges? We don't need no stinking badges!". Similarly, the Fed don't need no rules.