Crisis Compounded by Constraint: How Regulatory Inadequacies Impaired the Fed's Bailout of Bear Stearns Note
This Note explores the failure of the investment bank Bear Stearns within the context of the greater financial crisis that began in the summer of 2007, largely as a result of the widespread collapse of the market for subprime mortgage-backed securities. Specifically, this Note discusses in detail the circumstances surrounding the fall of Bear Stearns, the unprecedented measures taken by the Federal Reserve to avoid a disorderly breakup of the firm, and the policy implications of the Fed’s actions for the future of investment bank regulation. By devoting particular attention to the Fed’s response to Bear Stearns’s liquidity crisis, which peaked in March of 2008, this Note seeks to elaborate on the statutory provisions utilized by the Fed in the “unusual and exigent” situation presented by the Bear Stearns predicament. Moreover, drawing on criticisms voiced by members of both the public and private sectors regarding the inadequacies of the Fed’s regulatory resources during the Bear Stearns crash, this Note considers potential reforms to federal supervision of investment banks in the future. With the hope of better understanding the government’s role in the ongoing financial dilemma, this Note uses the Bear Stearns bailout as a template for increasing dialogue on the issue of the government’s proper function during a free market catastrophe.
Orticelli, Bryan J., "Crisis Compounded by Constraint: How Regulatory Inadequacies Impaired the Fed's Bailout of Bear Stearns Note" (2009). Connecticut Law Review. 55.