The Federal Reserve – Counterparty of (Next to) Last Resort

From Interfluidity, a good explanation of what really happened in the Fed-Bear Stearns-JP Morgan deal: 

http://www.interfluidity.com/posts/1207251546.shtml

The only thing I’d add is that the U.S. Treasury is actually the counterparty of last resort because it has guaranteed any losses from the deal up to $29 billion.  So, the Fed is the counterparty of next-to-last resort.  Hmmm.

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