Bear's Permanent Hibernation

Lots of emails asking for my take on Bear Stearns. As I mentioned a few days ago, I'm working on a longer piece about this, so instead of cannibalizing from it I'd rather link to it when it's done. For now, a few points. First, this was not a "bailout," at least in the narrowest (and I think most widely understood) definition of the word; Bear barely lasted a full trading day after news of the Fed's involvement. Essentially it was an intervention, and arguably a partial bailout of JP Morgan. On the continuum of expediency, it's somewhere between Long Term Capital and the RTC. Second, I see this as worthy more of indignation than outrage. That's because for anyone paying attention during the past decade or so to the evolution of monetary policy and broader trends like the socialization of risk, this should have been no surprise. Third, the implications for the future are far more troubling than this single episode. Because the government just deemed Bear, a medium-size player and non-commercial bank, as worthy of a public backstop to the tune of tens of billions, what do you think will happen if a Citi or Washington Mutual -- not too mention a Fannie -- finds itself in the same position? Fourth, in the debate about bailouts, Fed mandates etc., don't lose sight of the fundamental story: a small coterie of unelected and in many ways unaccountable statists just reached into the public till to facilitate a transaction between private parties who've made an extraordinary amount of money during the past few years (more on that soon from a personal perspective; I think many non-industry readers will be stunned). Finally, and along those lines, this reader's post on Barry Ritholtz's blog caught my eye:

Today's Fed actions led me to further think about the current state of our economic system. I have gone over in my mind numerous time about one fundamental question. Under what kind of system are we living? Is it Capitalism, Totalitarianism, Fascism, Communism or Socialism? Today's action provides the most direct evidence that our system has devolved back to FINANCIAL FEUDALISM, or FEDALISM as it could be more aptly called today. This remarkable act of bailing out one investment bank so that their derivatives wouldn't have to be marked to market proves the oligarchical nature of our society. The Lords of Wall Street are under the protectarate of the FEDal system. We the fifes must go about our daily lives and hand over increasingly large sums of our hard earned "money" to ensure the "stability of the markets". What bonus should Mr. Schwartz receive from the taxpayers largesse? As the new Sheriff of Nottingham, Ben Bernanke, and his sidekick, Hank Paulson, go about their daily adventures in destruction of our savings by debasing our currency, we the fifes can only look upon these actions with disbelief. This is a supposed to be a democracy, yet all these decision take place behind closed door under dubious circumstances and have unknown future consequences. This has gone far enough. We should demand the immediate resignation of Ben Bernanke and Hank Paulson, and start having some transparency in our markets. These ridiculous anti-Capitalism, anti-competitive, anti-free market, Save our Crony friends at any cost policies MUST STOP! Robin Hood, where are you?

As gold and oil have soared, I get occasional emails from happy readers asking for my opinion on the next big investment theme. If restive (but strangely encouraging) posts like that are any indication, pitchfork futures might be the way to go.