From the fed.gov
What are the Federal Reserve's responsibilities?
Today, the Federal Reserve's responsibilities fall into four general areas:
1---conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices
2---supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
3---maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
4---providing certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation's payments systems
#3 is what they were trying to accomplish here - basically there was a run on the 5th largest investment bank.
"Mr. Bernanke had made clear for months that he wanted to avoid a bailout of Wall Street. But as an economic scholar who spent years studying the Depression of the 1930s, he had also drawn the lesson that panics in financial markets can transform a modest downturn into a cataclysm.
Fed policy makers now contend that the consequences of not coming to the rescue would have been a cascade of bankruptcies and defaults on Wall Street that could have undermined the financial system and risked severe damage to the economy."
desperate times = desperate measures
for an interesting read - http://dealbook.blogs.nytimes.com/2008/ ... t-for-now/
don't know if you have to register - but basically says the collapse was precipitated by rumors they were going under - so everyone stopped making deals with them & was pulling money out - not only would this bankrupt bear stearns - but also throw the market into a death spiral -
The $2 / share figure is not a done deal - I believe the share holders still vote