Fed Takes Dramatic Steps to Avert Financial Crisis
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ALISON STEWART, host:
Overlooking historic Bryant Park in Midtown Manhattan, we are live from the NPR studios of Bryant Park, and this is The Bryant Park Project from NPR News. I'm Alison Stewart. It happens to be St. Patrick's Day, Monday, March 17th. So, top of the morning, afternoon, and evening to you, if you're listening to the show. How do I know it's St. Patrick's Day? Coming to work today, the barricades are up, lining Fifth Avenue. A huge parade here in New York City.
A lot of other cities though didn't have their parades today because it's actually the beginning of Holy Week, and the Catholic Church, they were way ahead of this game. They actually - in Ireland especially, they said, you know what? We're going to celebrate St. Patrick's Day on Saturday night. They made that decision back in the summer of '07, so these people were on top of it. A lot of people celebrated over the weekend. The pubs were crowded in New York City. But if you weren't celebrating this weekend, maybe you were at the movies.
A lot of people went to see that "Horton Hears" something, but some people went to the movies and didn't actually see a film. Some of them saw Formula 1 Racing instead. Movie theaters are venturing into a new territory, checking out sporting events on the big screen. Some theaters are even showing operas instead of blockbuster films. It is a whole new business model for theater owners, and the head of one chain is going to join us to tell us why it is a good business proposition. Why he just likes it.
Also, interesting story coming to us from a small town in Israel. A group of Jewish women there, orthodox Jewish women, have decided to cover themselves from head to toe in burqa-like garments. As you can imagine, causing quite a stir, causing a lot of controversy, as well as some stares. We are going to hear about it from a reporter covering that story in Israel.
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Oh, the economy. The Federal Reserve is taking major steps to avert a crisis in America's financial markets. After a weekend of just whirlwind negotiations, it's enacting a three-part plan that today's Wall Street Journal calls, quote, "historic." Part one, help JPMorgan Chase buy Bear Stearns. Part two, lend money to troubled investment banks, and part three, lower interest rates. And yesterday, there appeared to be a fourth part, too, a little economic cheerleading. Treasury Secretary Henry Paulson made the rounds of the Sunday talk shows, and told anybody who would listen that, although we're in a rough patch, things will be just fine.
(Soundbite of TV show "This Week")
Secretary HENRY PAULSON (United States Department of the Treasury): Our markets are resilient. They are flexible. I'm quite confident we are going to work our way through this situation.
(Soundbite of TV show "Late Edition")
Secretary PAULSON: Trust me. Our economy is structurally sound.
(Soundbite of TV show "Fox News Sunday")
Secretary PAULSON: I've got great confidence in our financial market, our financial institutions.
STEWART: Paulson must have been tired, because that was yesterday on ABC's "This Week," CNN's "Late Edition," and "Fox News Sunday," respectively. So, let's take the various parts of this plan in order.
(Soundbite of press conference)
MICHAEL CAVANAUGH (Chief Financial Officer, JPMorgan Chase): JPMorgan Chase is buying Bear Stearns.
STEWART: That's Michael Cavanaugh, the CFO, Chief Financial Officer of JPMorgan Chase, announcing the purchase yesterday, and his company is getting it for a bargain basement price, 236 million dollars, or less than one tenth of what Bear Stearns was worth on Friday. Now that's according to the Wall Street Journal's figures. And I know that some of these economic numbers can get a little tough to wrap your brain around, but here's one that will get your attention. One year ago, Bear Stearns was selling at 170 bucks a share.
Yesterday, JPMorgan agreed to pay two dollars a share. Two dollars. And they got help from the Fed, as well, who agreed to assume the risk of a lot of Bear Stearns' shaky investments. And those aren't the only investments the Fed is looking to bolster, which brings us to part two, a new program that will let big investment banks take out short-term loans starting, um, today. And then there's part three, the old standby, lower them interest rates.
Yesterday, the Fed lowered the rate they charge banks who borrow from them directly. Tomorrow, it's expected to lower another key interest rate, the one banks charge each other for loans, by at least half a percent. Now I know that sounds like a lot of ordinary Fed stuff, but it really isn't. Scan the headlines today and you can almost hear business reporters' jaws dropping. Words like "dramatic," "historic" and "unprecedented" everywhere.
So what about the unofficial fourth part of the plan? The economic cheerleading? How well are this weekend's moves being received? Well, stocks dropped in early trading today in Asia and Europe, and the dollar continued to fall. Stay tuned. Now let's get to some more of today's headlines.
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