At 5:00 a.m., we participated in a conference call with our colleagues at the Board of Governors and the Treasury to review the options and decide on the way forward. After careful deliberation, together we decided on a course of action that would at least buy some time to explore options to mitigate the foreseeable damage to the financial system. With the support of the Secretary of the Treasury, Chairman Bernanke and the Board of Governors agreed that the New York Fed would extend an overnight non-recourse loan through the discount window to JPMorgan Chase, so that JPMorgan Chase could then “on-lend” that money to Bear Stearns. This action was designed to allow us to get to the weekend, and to enable us to pursue work along two tracks: first, for Bear to continue to explore options with other financial institutions that might enable it to avoid bankruptcy; and second, for policymakers to continue the work begun on Thursday night to try to contain the risk to financial markets in the event no privatesector solution proved possible. Over the course of that day, March 14, Bear was downgraded by the credit rating agencies, and the flight of customer business from Bear accelerated. This set in motion a chain of decisions across the financial system as market participants prepared for the possibility that Bear would not be open for business once Asian markets opened on Sunday night.
We created the Tracker Fund in a little under 6 months, from the time the EFIL Board recommended on 21st June 1999 that this was the way to launch the disposal programme. We did this at a time when market sentiment in Asia was just beginning to become less negative. If this were not enough of a challenge, we also had the shadow of Y2K hanging over us! By some miracle or rather due to the sheer hard work, long hours and perseverance on the part of the project team, we overcame countless operational, IT, legal and regulatory challenges thrown at us. Just to add to the degree of difficulty, we had to work in the full glare of the public eye, knowing that any miscommunication (however slight) could have a severely negative effect not only on our stock market but also on the international perception of Hong Kong. I have to tell you that making the decision to use an ETF as the disposal strategy was not an easy one. The strategy was then unorthodox and unproven in Asia, as was the investment appetite for such a product. The investment banking community was perplexed that we should launch an ETF when a block trade or a convertible bond option was so much more “familiar” or “safer”. Our legal advisers were perplexed that we should launch a fund through an IPO.