"The Fed last week agreed to help JPMorgan acquire Bear Stearns after a run on Bear, once the second-biggest underwriter of U.S. mortgage bonds. In an effort to shore up Wall Street's other firms, it also agreed to become lender of last resort to all 20 primary dealers in Treasury notes."
Scott Lanman, reporting for Bloomberg

Ben Bernanke is making history.  On Wednesday, April 2, Ben Bernanke will testify before the Joint Economic Committee of Congress.If the Fed's intervention in the Bear, Stearns buyout works, he'll be a hero.  If not, he'll be a goat. 

Last week's buyout of Bear, Stearns by JP Morgan/Chase certainly calmed the markets.  That's good.  It stopped the US dollar's freefall, at least for the moment.  Not everyone is in agreement, though, that the Fed's intervention will prove to be a good thing. 

The Federal Reserve has pre-empted what has historically been the job of the FDIC:  it has chartered itself as a bank liquidator.  According to the FDIC, the somewhat similar bailout of the Savings and Loan collapse in the mid-eighties cost the taxpayer more than 75 billion dollars.  The liquidation "vehicle" was the Resolution Trust Corporation, formed in 1989.

That real estate shakeout took nearly a decade.  Bernanke can't afford such a protracted solution this time around.  Instead of government management, the Fed has created a private company (without Congressional approval or oversight) to manage the liquidation of Bear, Stearns mortgage backed assets.  Chartered in Delaware, it will be managed by Blackrock, Inc., the largest publicly traded asset manager in the US.

It's possible, and perhaps even probable in my opinion, that the Fed took the reins from the FDIC in order to avoid a direct parallel with the RTC and the present situation with Bear, Stearns.  We'll see. 

I'm Mike in Tucson, your preferred Tucson, Arizona mortgage lender.

Think of me as your local expert.