Monday, March 17, 2008



Toward the end of my Saturday posting on Bear (See “HILLARY CLINTON WAS RIGHT,” 3/15/08), I stated

“Bear’s stock (BSC) fell 47% yesterday to close at $30.00. Perhaps this is putting it too simplistically, but if BSC does not eventually go to zero, or close to it, then we will know that this bailout, ostensibly to help the innocent investor in money market funds exposed to Bear repos and/or to avert the collapse of the financial system, was really designed to help out those poor souls, like Jimmy Cayne and Alan Schwartz, who run, and are heavily invested in, Bear.”

So now that Bear has been sold, with the help of the Fed’s and the Treasury’s cudgel of withholding support, to JP Morgan for $2.00 (if the deal is approved by Bear holders, which is not an entirely foregone conclusion) and the risks of Bear have been effectively nationalized, with you, the taxpayer, ultimately assuming the risk wrought by the frivolousness of Bear’s traders and their counterparties, are last night’s actions still a bailout? Of course. This is still a bailout, not so much for Bear holders (though $2.00 is infinitely more than $0), but for those who lent Bear money and those who did business with Bear.

Again, people did foolish things with other people’s money, and one of those foolish things was doing business with Bear Stearns as a lender, a counterparty, or both. People in the money business don’t get paid big money for saying “Hey, it was f…ing Bear Stearns, how was I do know that they weren’t good for it?” People took risks. If those risks worked out, they would have made money. Those risks didn’t work out. They, not you, should bear the costs.

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