Hale Stewart:
On the Bear Stearns Situation
2008-03-17
Reuters/Shannon Stapleton
For all practical purposes, Bear Stearns is bankrupt. Despite the shotgun nature of the Bear/JP Morgan deal, Bear would not have agreed to a $2/share valuation unless the damage to their business was extremely severe. The Federal Reserve is scared sh*tless. There is no reason for them to get involved in this deal unless they were worried about one of two things (and probably both): 1) the ripple effect and/or 2) other banks in a similar situation. The Fed is looking for any tool (and making some new ones up) to prevent a system wide crisis. Bernanke is trying to prevent a financial sector meltdown.
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