Remember the good ol' days, when the size of government bailouts was measured in mere tens of billions of dollars? You know -- back in March? That's when the U.S. Treasury facilitated JPMorgan Chase's
The good news is that the rescue was successful -- the financial system suffered no mortal wound. For JPMorgan Chase shareholders, the news was even better; the bank walked off with Bear for a song. The bad news, for U.S. taxpayers at least, is that the value of Bear's portfolio has fallen since then. The Federal Reserve recently announced that it (or you the taxpayer, effectively) has a $2.7 billion paper loss on its commitment.
While I do think the government will ultimately record an aggregate gain on its investments in institutions such as JPMorgan Chase, Bank of America
There are two morals here: First, when you guarantee the value of a portfolio of dodgy assets, you should ask for something in return. Not demanding warrants from JPMorgan Chase was a mistake.
You really want to expand the bailout?
Second, this episode and AIG's
Further credit crisis Foolishness:
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Fool contributor Alex Dumortier, CFA has a beneficial interest in Wells Fargo, but not in any of the other companies mentioned in this article. JPMorgan Chase and Bank of America are Motley Fool Income Investor selections. Try any of our Foolish newsletter services free for 30 days. The Fool's disclosure policy wishes to clarify that Friedrich, regrettably, is no relation to Salma.