While Bear Stearns is not a bank in the same sense as Citibank or Chase, that distinction is blurry at best and non-existent at worst. The Glass-Steagall Act which separated investment banking aka Bear Stearns from Commercial banking i.e. Citibank was repealed in 1999 by Congress and Signed into law by Clinton. Did that repeal contribute to current crisis we're in today is a topic in itself. The recently announced Term Lending Facilities that would've gone into effect in a little over 3 weeks would've let banks such as Bear Stearns borrow at the discount window. Apparently it was too little too late.

As for Bear Stearn's woes, those are woes that can be faced by any bank (investment or otherwise). The run on the bank is not coming from depositors but other creditors, i.e. other banks. Bank and other financial institutions are tied together by a complex web of credits and debits. When it's running smoothly things are great and money flows freely, but when things go bad it resemble a house of cards. Bear's creditors demand immediate payment, therefore Bear can't make them and other payments, those other payments put another bank in precarious situation and so forth.

I had hoped the financial markets would've been more resilient and been able to work itself out a bit more. I guess I was wrong. This exact thing happened on smaller scale when Enron went belly up eroding the financial footing of the entire power marketing industry. That industry which I work survived a difficult 3 years, and Enron was by far the largest player in that industry. The collapse of Enron is more akin to the collapse of Citi, JP Morgan Chase, Goldman, and Merrill combined.

I'm personally a little surprised that Bear was too big too fail. If it was truly was too "big" then clearly there's something seriously wrong with risk management on Wall Street. And if it wasn't then the Fed is setting a dangerous precedent.

Wall Street is nothing more than the rich man's Las Vegas, with the big boy's running the tables by their own rules. They deal and set the rules. Small investors can get lucky, but they don't understand that big money drives the market. Their IRA's and 401K's will be worthless by the time Wall Street is done, which won't be long.

Where else can bad managers get huge bonuses and the federal government makes borrowing easier so that they can lose more. It's as though the casino owner tells the big loser, "No problem. We'll just give you more credit. Sooner or later you'll win it back."

It could happen, but not so long as Americans are told to BUY, BUY, BUY. Keep the economy going by buying. It used to be money to lend came from savings. Today it comes from the printing presses. Few people realize that we are headed directly toward hyperinflation just like Germany experienced before Hitler took control. Those poor people thought that he was the solution.

The solution is to do away with the Fed and force banks to do credit checks and be responsible once again for their loans and not be allowed to bundle them and sell them to others. The U.S. and world economies must suffer now to return to sanity. I wish that it weren't so, but it is. We are on the verge of another depression, one that is overdue.

The Economist in December had this nailed pretty well--we're screwed. Without a coherent plan (this Congress and Administriation is completely incapable of planning anything) out of sub-prime the entire financial sector goes splat this is due to two reasons:

• Fear--without a coherent definition of what the sub-prime mess is and who are the big losers investors will act out of emotion and cut off investing in anything, call in their margins, etc.

• Failing to eat their own doo doo--by bailing out ANY financial firm the fed is underminining their own line of BS that they have spewed for the last 20 years--namely, that wall street is perfectly capable of self-regulation and that the "market" will weed out deceptive and slimy products. Ha. What a load.

So, here we are, a short three months later and the whole thing has cratered. My question is why? Why bail out anyone? Let these firms go down in flames--wouldn't that at least get the suffering over with ASAP? Instead they drag down the dollar along with their pals second home's in the Hampton's--why should we give a sheet?

Here's a pattern I've noticed in the past year and it puzzles me. When some economic crisis hits the US, like the BS-storm, foreign markets take the news much more seriously than we do in the US. The Hang Seng droped over 5% yesterday, and the DAX nearly 4% today. In the US, after a low opening, the DOW has been climbing all morning. Why do foreign markets always react more dramatically than American ones to American economic woes?

Make no mistake about it, the Fed has intervened not to the save in the investor class as so many here are want to believe. They have intervened to save the financial system. There are valid arguments about the moral hazard such a deal imposes, and if the bail out is even necessary, but it's not like either investors or employees of Bear are walking away with much. I know from an employee that Bear bonuses over 250k were not to vest for another 5 years and were equity based. Investors are getting pennies on the dollar for their investment.

The ultimate problem that will not go away is what do you do about risk that can ultimately make any investment worthless. Obviously there are cases of criminal fraud which must be penalized, but it's a slippery slope. Do we return the days of debtor prisons?

Perhaps the reason for the Fed's $30 billion infusion of cash is to prevent another meltdown like the S&L crisis of the 1980s. From what I've read in the financial press, BS (hahah) has enough assets to cover that Fed loan, and JPM isn't assuming any liability for its debts. The taxpayers bailed the S&Ls out to the tune of about $125 billion (in 1980s dollars). Unsound real estate lending practices also contributed heavily to that debacle (as well as the S&Ls having to pay much higher interest rates on deposits than their mortgage portfolios were generating). During the S&L criss, home building slipped to its lowest rate since WW2. Doomsayers were insisting the economic sky was falling them, too. But within a few years, the economy (and us poor taxpayers) had pretty much digested the whole mess. This too shall pass. But not without a lot of pain.