Fed: Size of Bear Stearns Loan Declined by $1 Billion - Financials * US * News * Story

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CNBC ON DIGG

Fed: Size of Bear Stearns Loan Declined by $1 Billion

Topics:Subprime Lending | Banking

Sectors:Banks

By: CNBC.com | 03 Jul 2008 | 05:21 PM ET

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The Federal Reserve Bank of New York said Thursday that the value of the Bear Stearns portfolio it has held since that firm's acquisition by JPMorgan Chase declined by $1 billion to $28.9 billion.

bear stearns, bsc, jpm, jpmorgan, fed, federal reserve
CNBC.com
In March, in a highly unusual move, the Fed provided the financing for JPMorgan [JPM Loading... () ] to acquire Bear Stearns in order to prevent Bear from going bankrupt and potentially dragging down the entire financial system.

Part of that deal was that the Fed would hold the Bear assets.

The value the Fed now places on Bear's portfolio is important as a benchmark for how mortgage-backed assets have performed since March, said William Sullivan, chief economist at JVB Financial Group.

Many analysts expected the value of the Bear Stearns loan to show a drop in value over the three months the Fed has held the bonds and other securities.

The Fed's valuation of the Bear Stearns portfolio may provide some measure relief to investors and market-watchers. If the portfolio's value had dropped to below about $24 billion, that would have indicated that mortgage-backed securities have fared even worse in the second quarter than markets have already reflected, analysts said.

Discount Window Borrowing Falls

U.S. banks' direct borrowing from the Federal Reserve at the discount window slipped in the latest week, Fed data showed on Thursday.

Banks' discount window borrowings averaged $16.78 billion per day in the week ended July 2, compared with an average $20.87 billion per day a week earlier.