This was referred to me by a reader whose email I misplaced, so I cannot give him a hat tip, but thank you anyway. Here is an excerpt from Institutional Risk Analytics :
Here's our question: Why did the Fed of New York facilitate the rape of BSC by JPMorgan Chase (NYSE:JPM)?
The announcement by the Fed of a new lending facility for broker-dealers to borrow from the discount window, made just hours after BSC's board of directors apparently was forced by the Fed to sell for $2 per share to JPM, strikes us as clear evidence of an anti-BSC bias by the US central bank. Why not just lend directly to BSC under the new Fed loan facility?To us, even at $10 per share, the JPM buyout stinks to high heaven because of the conflicted role played by the Fed of New York. Does anyone believe that the Fed would force Lehman Brothers (NYSE:LEH) or Goldman Sachs (NYSE:GS) into such a fire sale? Indeed, it looks to us like the Fed of New York and BSC both got rolled by JPM CEO Jamie Dimon and his merry banksters. But the JPM crowd won't be laughing much longer.
One prominent New York lawyer who is very well acquainted with the Federal Reserve Act tells The IRA that the Fed of New York did two things last week: 1) approved a loan to JPM, which was then passed through to BSC; and 2), created a new facility to lend directly to broker dealers under Section 13 of the FRA.
"There is nothing new here," adds the lawyer, who notes that the Federal Reserve Banks made loans to individuals in the 1930s under the emergency provisions of Section 13 of the FRA and could have easily lent directly to BSC without involving JPM at all.
Thus again the question to Fed of New York President Tim Geithner: Why was JPM involved in this transaction? Why not simply extend liquidity support to BSC as you now offer to every other primary dealer? As and when BSC shareholders litigate over this mess, Geithner et al may be forced to answer those questions in public.
The same forces that pushed BSC into insolvency are working on JPM and the other money centers as you read these lines, but JPM first and foremost. Just look at the range of valuations included in JPM's disclosure to Canadian officials regarding price estimates for illiquid structured assets and you can see why JPM's Dimon has been so upbeat in recent months.