My Photo
Note: Jeff does not accept guest blog posts on A Dash of Insight.

For inquiries regarding advertising and republication, contact [email protected]

Follow Jeff on Twitter!

Enter your email address:

Delivered by FeedBurner


  • Seeking Alpha
    Seeking Alpha Certified
  • AllTopSites
    Alltop, all the top stories
  • iStockAnalyst
Talk Markets
Forexpros Contributor
Copyright 2005-2014
All Rights Reserved

« Bear Stearns Bailout Implications | Main | Analyzing Fed Critics: Paul Kedrosky »

March 17, 2008



Barry -
Thanks for stopping by with your comment. We agree that this is hardly a bailout for Bear. This means that we should all drop the "moral hazard" rhetoric, right?

The WSJ today had a very good article on the events leading to the decision. The details are completely supportive of my analysis, written before that article appeared.

It says nothing about "embarrassment" but it says a lot about avoiding systemic failure.

There is a simple fact here. The Fed has taken many decisive actions that you and other pundits did not forecast, but we did on several occasions. You can expect the Fed to continue in this policy approach, addressing issues that affect all of us.

There is a clear division for investors. We suggest not fighting the Fed. The FOMC is not going to follow your ideas of what they should do.

Once again, we always appreciate it when you take time to comment here.


Barry Ritholtz

Rescue? Bailout? Hardly.

This was an orderly liquidation that spared the market of a panic (and the nation of the embarrassment) upon the 5th largest investment bank in the USA going belly up.

Christopher Tinker

Surely what the Fed has done is simply take out the Shadow banking system from needing to exist? If you can repo every mortgage or corporate bond issued back to the Fed - why would you need a SIV to hold mortgage assets in? Much better for the Fed to see credit creation under its control than outside of its remit. By stopping mark to distress model pricing from driving down asset valuations and pushing margin calls and haircuts to levels where asset values go into a death spiral, the introduction of a asset backed repo/swap facility meant that it suddenly became in every creditors' interest to force Carlyle Capital to the wall, seize the assets and then repo them back to the Fed and value them at the correct price. Nice work if you can get it I guess. I've written a long article on this and other thoughts if you are interested and want to email me with your contact details


Yes, the fed can save all of us. Its a prosperity creating machine.


"...But the time to worry about moral hazard was two years ago when the various authorities allowed institutions to make subprime loans to people with no jobs and no income and no means to repay and then sold them to institutions all over the world as AAA assets..."

Bush's 2004 Zero-down Bill is a Hit


By '...various authorities?" Mauldin meant the GOP, right? Oh... sorry as Paulson said, we don't want to blame anybody.

Better "various authorit(y)" timing probably would have saved Carlyle and Bear.


Surely you jest! A glance at the last 25 years shows a repeated pattern of a GOP administration in an election year 'nationalizing' the assets of one institution while protecting the interests of other institutions.

The 'nationalization' of Continental Illinois National Bank in May 1984. Stockholders equity went to zero. But hundreds (if not thousands) of investors in CINB certifcate of deposits were bailed out by the nationalization.

The 'nationalization' of Silverado S&L in 1988. Don't even get me started!

BSC was sent to $2 to avoid their counterparties from having to pay any consequence and causing turmoil in an election year! Taxpayer funds were used for this. If this is 'free markets' then freedom=slavery, war=peace, and ignorance=strength.

Only a long time Bush II apologist like Mauldin will assume that we all have forgotten the past.

The comments to this entry are closed.