Based on what is known, it’s widely believed that, using J.P. Morgan as the conduit, Bear Stearns swapped its bad assets (Alt-As) for U.S. Treasuries. The Federal Reserve ends up with the BS bad assets; BS ends up with clean Treasuries.
This past December Bear Stearns increased the percentage of its revenues used to compensate its traders, executives, etc. to 57.6% of its revenues (up from 47.1% in prior year)? Yes. And guess what? These same executives took $4.15 Billion out of BS as 2007 compensation. http://dealbook.blogs.nytimes.com/2007/12/20/bear-stearnss-grim-bonus-math/