Bear Stearns got screwed by the government .There was no need for a bailout (and yes it was a botched attempt at a bail out)
This is how Larry Kudlow explained it.
Quote:
Since the elimination of the Glass-Steagall Act in 1999 -- a move that broke down the wall separating commercial and investment banks that had existed since the 1930s -- the Federal Reserve never changed its discount lending policies. In other words, until Sunday night, when Bear Stearns was already destined for the dustbin, the Fed was able to make loans to commercial banks like JPMorgan Chase, but not directly to brokers like Bear Stearns.
Throughout the credit crisis, which dates back to last summer, the Fed’s discount lending to banks was supposed to trickle down to brokers. But it never really did. Big banks either horded their cash or spent it for their own various purposes. As one Bear Stearns official noted to me, this is the first credit and lending crisis since the end of Glass-Steagall. And the consequences for Bear Stearns were catastrophic. While the Fed announced a $200 billion auction lending facility for both banks and brokers last Tuesday, that facility won’t be activated for a couple more weeks. So no help there.
But if the Fed had changed its discount polices to reflect the post-Glass-Steagall era, Bear Stearns could have accessed short-term Fed loans, even for a few days. That could have made all the difference in the world.
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The fact that JP Morgan has upped the price of it's offer means that Bear Sterns was in better shape than everyone thought.
If what happened to Bear Sterns is a bail out then count me out . I'd rather swim with the sharks on my own.
Credit crisis happens from time to time and the worse thing that the gvt. can do is to over react and interfere too much . It's an election year so expect the panderers of both parties to be very generous spending our money for various reasons.
And yes ,Evita and Obama are sure to take advantage of this and usie it as a justification to bail out everyone who happens to have a bad mortage using the same class distinction rhetoric in this posting .
Bernanke and Paulson have been major disappointments . (so is that other idiot from Goldman Sachs NJ Governor Jon Corizine ) They have not acted nearly aggressively enough to prop up the dollar .Even Clintonista Paul Rubins realized the dollar had to at least remain stable and would purchase dollars from time to time to strenghten it.
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