Bear Stearns Deal Simplified

Here is a summary of what the deal meant for the US Tax Payer


1. Bear had illiquid assets that JPM did not want to touch. This portfolio consisted mainly of mortgage-backed securities and other mortgage-related assets.

2. Now the Fed will lend $29 billion to a Delaware limited-liability company(DLLC). DLLC will hold a portfolio of illiquid Bear Stearns assets, which Bear Stearns valued at $30 billion on March 14. JPMorgan Chase & Co., which completed its purchase of Bear Stearns this month, will lend DLLC $1 billion and absorb the first $1 billion of any losses. The Fed is on the hook for the rest.


3. Fed Hired, BlackRock Inc., to manage the sale of the assets over the next 10 years. The proceeds will go back to the Fed and then, if anything is left over, to JPMorgan after the Fed is paid.

4. Fed(Timothy Geithner, the New York Fed bank's chief executive) has said it will disclose the fair value of the Bear Stearns portfolio on a quarterly basis.