The announcement came as commercial banks were figuring out how to
protect against the possible looming downfall of Lehman Brothers. As of now, they are trying
to find out if there is another financial institution that is able and willing to take over
Lehman Brother and if not, then try to gather several institutions that may be willing to
lend a hand. By doing so, they hope to prevent against possible future vulnerabilities and eleviate
escalting risks and further disruptions.
This is just one of many of the steps the Fed has taken to help protect our financial institution for
its rising credit problems, which was caused from the subprime mortgage crisis. In 2007, the Fed offered
an emergency loan program to commercial banks that needed the help. Toward the end of the year, the Fed offered troubled banks
an opportunity to auction off loans.
Then a few months into 2008, after Bear Stearns nearly collapsed, the Fed expanded yet again by allowing banks
to get money directly from them. Eventually, JP Morgan Chase and Company took over with a nearly 30 billion dollar
loan from the Fed.
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