Bear Stearns acquired
After a weekend of negotiations, JPMorgan Chase bought Bear Stearns for $2 per share (later raised to $10), down from $172 a year earlier. The Federal Reserve provided $29 billion in non-recourse financing to facilitate the deal. Six months before Lehman. The dress rehearsal for the full crisis that the authorities did not fully recognize as a dress rehearsal.
The Bear Stearns weekend established two patterns for the following year: the government would backstop systemic-bank mergers at public cost, and it would do so under extreme time pressure with minimal Congressional input. Both patterns held through the rest of 2008, and both became the political wound that produced the Tea Party movement.
08 · Global Financial Crisis
The US subprime mortgage market cracked in 2007. It took the investment banking industry with it in 2008. Lehman Brothers filed bankruptcy on September 15; the following two weeks, the global financial system came within hours of seizing. AIG, Fannie Mae, Freddie Mac, Wachovia, and Washington Mutual were rescued in succession. $33T in global wealth was destroyed. Recovery took until 2013.
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