Sunday Evening Exercise From The Fed

From CNN: Fed cuts discount rate - Sunday surprise

From Yahoo:

• The Federal Reserve, in an extraordinarily rare weekend move, took bold action Sunday evening to provide cash to financially squeezed Wall Street investment houses, a fresh effort to prevent a spreading credit crisis from sinking the U.S. economy.
  
  The central bank approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created a lending facility for big investment banks to secure short-term loans. The new lending facility will be available to big Wall Street firms on Monday.

And Asian markets plunge on Bear news

• SEOUL, South Korea (AP) -- Asian stocks plunged Monday after JPMorgan Chase said it would acquire troubled U.S. investment bank Bear Stearns. The U.S. dollar fell sharply against the Japanese yen.
  
  Japan's benchmark Nikkei stock index and Hong Kong' Hang Seng index both fell more than 4%. The Korea Composite Stock Price Index in Seoul declined more than 3%. Markets in Australia and New Zealand also fell.
  
  JPMorgan Chase said Sunday that it would acquire its rival in a deal valued at $236.2 million - or $2 a share and that the Federal Reserve would provide special financing for the deal.
  
  News of the acquisition of Bear Stearns, one of the world's largest and most venerable investment banks, came just before the opening of markets in Tokyo and Seoul.
  
  The buyout was aimed at averting a bankruptcy and a spreading crisis of confidence in the global financial system. The Fed and the U.S. government swiftly approved the all-stock deal.
  
  "We are worried about the next step," Shim Jae-youb, a strategist at Meritz Securities in Seoul, said of nagging concerns in Asia that the trouble in big U.S. banks was unlikely to be contained just to Bear Stearns.

On CNBC Markets Tumble on Shock Fed Rate Cut, Bear Stearns

• The plethora of financial news, coupled by a sinking dollar revived fears that a long-lasting global credit market crunch would claim more financial companies. Banks across the region were battered. Citigroup's Japan listing was down over 7 percent. Japan's Mitsubishi UFJ Financial, Hong Kong's HSBC Holdings, South Korea's Hana Financial, and Australia's Macquarie Group were all plunging.

Golfing? From article posted on Yahoo here

• A bankruptcy protection filing of Bear Stearns could have heightened anxiety in world financial markets amid a deepening credit crunch. So far, global banks have written down some $200 billion worth of securities slammed amid the credit crisis -- more write-downs could come. Last week, a bond fund controlled by private equity firm Carlyle Group faltered near collapse because of investments linked to mortgage-backed securities.
  
  JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.
  
  "The past week has been an incredibly difficult time for Bear Stearns," Schwartz said in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."
  
  Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world's largest investments banks -- it was a prop for the U.S. economy and the global financial system. An outright failure would cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.
  
  After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.
  
  This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail." On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.
  
  Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities -- and what was once a cash cow turned into the investment bank's undoing.
  
  In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.
  
  The funds' demise and subsequent problems in the credit markets called into question Bear Stearns' ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.
  
  Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.
  
  Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."