Sudha Shenoy, PhD (1943–2008) was an Austrian School economist and economic historian. From 1986 to 2004, she worked as a lecturer in economics at the University of Newcastle in Australia. She was an Honorary Associate in Economic History at the School of Policy and an adjunct scholar at the Ludwig von Mises Institute.
Shenoy was a strong advocate of free trade and a critic of central planning and the welfare state. She once told Lew Rockwell that Australia was “freer than the US.” When Rockwell asked why, she replied: “Because Australia never had a civil war, and so we still have states’ rights.” She added: “Jefferson was correct about competitive sovereignty helping to preserve liberty.”[1]
Federal Reserve officials twisted J P Morgan’s arms — which was why the latter ‘agreed’ to buy. Officials had to provide Morgan’s with a loan & a guarantee against the weakest ‘investments’ — bad mortgages — in the Bear Stearns portfolio. These dubious liabilities amount to some $US 33,000 million — or some 138% of its total purchase price. Thus its unsound investments are one reason for the very very low price that Bear Stearns’ shareholders received — even from J P Morgan’s & even after a Federal loan + guarantee.
In the absence of Federal Reserve intervention & arm-twisting, Bear Stearns would undoubtedly have had to cease trading. And no doubt it would’ve been taken over, eventually — at an even lower price. All that govt officials could do was to shorten this time period, & possibly prevent Bear Stearns’ value from falling even further. But even the almighty Federal Reserve — the world’s largest & most powerful central bank — could not prevent the huge capital losses that Bear Stearns’ shareholders suffered. In short, even the Fed could not stop the de facto failure of one of the world’s largest investment companies.
