Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Friday, March 14, 2008

SEC Trading & Markets Div. on Bear Stearns

The SEC's Division of Trading and Markets today issued the following statement regarding The Bear Stearns Companies:

"The decision by the Federal Reserve Bank of New York to provide The Bear Stearns Companies temporary funding through J.P. Morgan Chase & Co. today followed a significant deterioration in Bear Stearns' liquidity on Thursday. The Division of Trading and Markets has monitored both the capital and the liquidity of the firm on a daily basis in recent weeks. The purpose in doing so on a firm-wide basis has been to consider all potential impacts on the financial health of the two major U.S. registered broker-dealers and the other regulated entities in the Bear Stearns consolidated group.

"As of its most recent capital calculation as of the end of February 2008, Bear Stearns' holding company capital exceeded relevant regulatory standards. According to the information supplied to the SEC by Bear Stearns as of Tuesday, March 11, the holding company had a substantial capital cushion. In addition, as of March 11, the firm had over $17 billion in cash and unencumbered liquid assets.

"Beginning on that day, however, and increasingly throughout the week, lenders and customers of Bear Stearns began to remove funds from the firm, despite its stable capital position. As a result, Bear Stearns' excess liquidity rapidly eroded.

"The Division is continuing to monitor Bear Stearns' condition with a view to the safety of its regulated entities including its registered broker-dealers. The Division believes that Bear Stearns' registered broker-dealers remain in compliance with Commission capital rules.

"The SEC also is working closely with the Department of the Treasury, the Federal Reserve, and the Federal Reserve Bank of New York to ensure that our regulatory actions contribute to orderly and liquid markets."

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