The Federal Reserve Loan to JPMorgan Chase & Co. When the Federal Reserve makes a loan to a bank or financial institution, it requires the institution to specify certain assets the Federal Reserve can take possession of if the loan is not repaid. These assets are known as collateral. When the Federal Reserve made its $30 billion loan to JPMorgan, it allowed JPMorgan to use some of the assets of Bear Stearns as collateral. Why was this risky for the Federal Reserve and a good deal for JPMorgan? (Related to Application 4 on pages 312–313.)
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