Spring (2018) was the ten year anniversary of the Bear Bailout when the Fed helped JP Morgan purchase Bear Stearns (March 14, 2008).

Ten Years After the Bear Stearns Bailout, Nobody Thinks It Would Happen Again

The Federal Reserve tried to limit the damage with extraordinary actions, first extending the firm credit before forcing it into a hasty weekend shotgun marriage to JPMorgan Chase & Co., with $29 billion in assistance.

a) (20 points - 10 points for correct T accounts and 10 points for explaining what is happening in each players T- accounts). So the Fed, roughly 14 years ago, lent JP Morgan $29 Billion. The Federal Funds Target at this time was 3% and the Fed was serious about maintaining this target throughout the bailout. Using the three T-accounts below - show exactly how the Fed maintained the 3% target even though they lent JP $29 Billion.

Now depict this episode using a reserve market (demand and supply) diagram. The federal funds target was 3% and the amount of reserves in the economy was $44 billion before the loan to JP. Show how the $29 billion loan to JP would effect your reserve market and then explain what the Fed had to do to maintain their 3% target. Explain in detail.

JP Morgan The Fed Dealer A A L A L JP Morgan The Fed Dealer A A L A L