<p>"The Fed said March 16 it would provide financing to JPMorgan for $30 billion of Bear Stearns assets. Yesterday, it released terms of the funding, including some details on the company managed by BlackRock. The Fed said JPMorgan will shoulder the first $1 billion of any losses, disclosed that the loan will be for 10 years and carry the 2.5 percent interest rate charged to commercial banks at the discount window. </p>
<p>Fed officials defended their role in the Bear Stearns rescue as necessary to prevent a broader financial panic. Credit markets have been roiled by concerns that borrowers won’t repay debt, and funding has dwindled for securities firms, hedge funds, and mortgage banks. </p>
<p>Still, Bernanke and New York Fed President Timothy Geithner may have overstepped and altered the role of the government in financial markets, said Joe Mason, associate professor of finance at Drexel University in Philadelphia. </p>
<p>`Far Outside’
The Fed is so far outside the traditional bounds,'' said Mason, a former economist at the Office of the Comptroller of the Currency, one of five federal bank regulators.It isn't innovative, it is taking a step back in time to a system of direct credit'' where the government decides ``who gets funding and who doesn't,'' he said. </p>
<p>Under the terms of the deal, the Fed will loan $29 billion, and JPMorgan will loan $1 billion, to a new company based in the U.S. state of Delaware."</p>