Bear Stearns' collapse and rescue sale

Bear Stearns, like other Wall Street investment banks, relied heavily on overnight 'repo' funding — pledging bundles of securities to other firms in exchange for short-term cash to keep operations running day to day. When Moody's downgraded a swath of Bear's mortgage-backed securities to junk status in March 2008 amid worsening subprime losses, counterparties lost confidence and pulled back from lending to the firm almost overnight, leaving it unable to fund itself by midweek. Over the weekend of March 15-16, the Federal Reserve, the Treasury, and JPMorgan Chase negotiated an emergency sale in which JPMorgan agreed to acquire Bear Stearns, with the New York Fed committing to fund up to $30 billion of the firm's less liquid assets to make the deal possible. The Fed's unusual weekend intervention, and its willingness to backstop assets it would not normally touch, signaled how seriously regulators viewed the risk of a major investment bank failing — a preview of the far larger interventions to come later that year.