The Federal Reserve moved to assist a Wall Street investment bank on the brink of bankruptcy to prevent a failure that could have dealt serious consequences to the U.S. economy, Federal Reserve Chairman Ben Bernanke said.
"Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain," Bernanke told the Senate Banking Committee.
Bernanke was the top witness at a hearing called to examine whether the Fed was justified in providing up to $30 billion to facilitate the sale of Bear Stearns to JP Morgan Democrats on the Senate Banking Committee said they wanted to find out what pressures the Bush administration had brought to close the sale and whether big investment banks were getting preferential treatment over millions of Americans in danger of defaulting on their mortgages.
"Was this a justified rescue to prevent a systemic collapse of financial markets or a $30 billion taxpayer bailout for a Wall Street firm while people on Main Street struggle to pay their mortgages?" Senate Banking Committee Chairman Christopher Dodd asked at the beginning of the hearing.
That brings us to our Fast Money Reader Poll. (And let's only tackle the first part of Senator Dodd's question for today.) Do you think the Bear Stearns bailout was a justified rescue to prevent systemic collapse of the financial markets?
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