Fed Clears Way for Bear Stearns Deal

WASHINGTON — The Federal Reserve on Tuesday cleared the way for JP Morgan Chase & Co. to acquire Bear Stearns' bank holdings.

The approval allows JP Morgan to acquire Bear Stearns Bank & Trust in Princeton, N.J., the Fed said.

In a controversial move, the Fed last month backed a $29 billion lifeline as part of JP Morgan's takeover of troubled Bear Stearns, the nation's fifth-largest investment house, which was on the brink of bankruptcy. The company had invested heavily in risky mortgage-backed securities that eventually soured with the collapse of the housing market.

JP Morgan is not required to obtain the Fed's prior approval to acquire Bear Stearns Cos., the Fed said in a brief statement.

Bears Stearns Bank & Trust operates in New Jersey and is the 45th-largest bank in the state, controlling deposits of approximately $398 million, the Fed said. Upon completion of this acquisition, JP Morgan would remain the country's third-largest bank, the Fed said.

"Based on all the facts and circumstances, the board has determined that an emergency exists requiring expeditious action on the proposal," according to the Fed's order clearing the bank purchase.

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