Federal Reserve extended lending aid for Bear Stearns & Co, a large publicly held home mortgage company who has been in financial trouble in recent years. The sub-prime home loans took their toll onn Bear Stearns, but they got a nice boost with the recent Fed moves. In conjunction with the move by the SEC, the Federal Reserve said Wednesday morning that it would extend additional emergency lending aid to non-bank financial institutions through the end of January. The primary dealer credit facility gives investment banks access to the Fed’s discount window, and was thrown open during the March blowup at Bear Stearns & Co.
The Fed said it was taking these steps “in light of continued fragile circumstances in financial markets.” GiAccording to Paul Jackson, investors are welcoming the finance news, however the extension opens up an ongoing debate over the Federal Reserve’s role in regulating investment mortgage banks. Commercial bankers have remarked for months now that the Fed should have regulatory authority over investment banks if they will be lending cash for any duration.
A story in the Wall Street Journal went so far as to suggest that the Fed’s move had less to do with the state of the investment banks, than it does with ensuring that the Fed itself remains in the driver’s seat with respect to the tone of the capital markets.
