So I’ll admit to being jaundiced. But when Bear Stearns is at risk, the government works over the weekend(!) to craft a bail out that will “save” the embattled Wall Street firm. Where Wall Street gets lifeboats, consumers get tossed into the sea, with a “Good luck with that,” kind of  castoff .

There are obvious differences, of course. Consumers signed up for complex mortgages on wings and prayers. To the extent that they understood what they were getting, they were betting on rosy economic futures to cover the spread.  Wall Street firms merely took the rosy deal-based transactions, lumped them together for that all-important multiplier effect and then invested in, loaned on and traded around a series of unregulated securities that were rotten to the core. And then it all went to hell.
I’m not really tickled to learn that I am helping to guarantee the failures of unregulated greed. We all pay because taxpayers get to fund the Bear Stearns bailout.  I’m waiting for the advocates of the free market to explain why Wall Street gets bailed out and why consumers are left to drown in debt. If we’re going to enter an era of socialized banking, shouldn’t the borrowers also get bailed out.

David F. Sugerman

The news reports over the weekend of the Bear Stearns bail out tell the remarkable story of federal intervention to avert a complete melt down. The Wall Street investment bank was about to go down the tubes when the feds intervened and helped JP Morgan purchase Bear Stearns for a price reported to be two dollars per share.
Apparently, when Bear Stearns is circling the drain, the feds get really concerned and even work over the weekend. This is a remarkable thing. Of course, when consumers go into crisis over bad mortgage loans, the fed doesn’t do so much.

Interestingly, when consumers sought relief from Congress, the problem wasn’t urgent. Many opposed consumer relief, including this master of one-sided rhetoric. When it finally came, consumer relief was thin, to be charitable.

We are told that regulation is bad and free market is good. When consumers get into trouble with predatory loans, we are told that this is a market problem, and some go so far as to blame consumers for agreeing to bad deals. I get that. But I haven’t heard any squawking about the free market when it comes to Bear Stearns’ bail out. Maybe it’s early.
David F. Sugerman