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Getbig Main Boards => Politics and Political Issues Board => Topic started by: Bindare_Dundat on September 16, 2008, 07:08:08 PM
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NEW YORK (Reuters) - The New York Federal Reserve intervened aggressively to shore up the U.S. financial system this week, providing at least $87 billion to help underpin trades with units of bankrupt Lehman Brothers Holdings Inc, court documents show.
The Fed's action is the latest sign of how U.S. authorities have been seeking to prop up financial markets following the failure of Lehman (LEH.P) and as big insurer American International Group (AIG.N) fights for survival.
While the government had pledged not to fund a rescue of Lehman, the disclosure on Tuesday showed that authorities were taking other financial steps to prevent markets from descending into chaos.
JPMorgan Chase & Co (JPM.N) advanced $87 billion to the units on Monday to help clear and facilitate securities transactions with customers and clients of Lehman "to avoid disruption of financial markets," according to documents filed in the U.S. Bankruptcy Court for the Southern District of New York.
Lehman and the New York Fed had requested the advance, known as a "commencement date advance" and the New York Fed repaid it, according to filings.
In effect, the New York Fed lent the funds to the units.
A representative for the New York Fed declined to comment.
"This expansion of the Fed's credit program is unprecedented," said David Pauker, a managing director with restructuring adviser Goldin Associates.
Harold Novikoff, a lawyer for JPMorgan, told the court that the firm has regularly provided these advances for Lehman to facilitate its trading, but was typically paid back by other parties who would step in overnight to repay JPMorgan. However, some of those third parties have disappeared since Lehman's bankruptcy, filing necessitating the intervention from the Fed.