There's an article in the New York Times today (via Consumerist) which details a disturbing development on Wall Street. The investment fund, Bear Stearns, had what is known as a "run on the bank". In layman's terms, BS said they weren't collapsing under the weight of their putrid subprime mortgage business - and the error of investing too heavily in them. Their investors begged to differ, and many of them asked to pull their money out of BS. The action of BS's investors would have lead to its demise, until the Fed, backed by JP Morgan, gave some short-term float cash to BS.
Now, take a sec to think about this. The Fed's action in this case amounts to nothing more than a government handout. In a truely free market, BS would have been left lying face-down in the gutter to bleed out and die, with its rotting corpse swept away to some unknown sewage treatment facility the next time there was a torrential downpour. This is not what happened. In fact, it looks like BS got the money from JP Morgan, but the Fed gave JPM the money to give to BS, since BS can't borrow the money from the Fed's themselves.
It's saddening and sickening how far this credit and mortgage fallout is stretching. Sad, since no one really knows how bad it's going to get in our economy; sick, because the people that will be affected most harshly are the little guys that bought into the BS via bad loans that Wall Street knew people wouldn't be able to repay. Now that people are foreclosing left and right on their homes, they aren't paying their lenders back. People would rather be bankrupt than saddled with unsurmountable debt, and its banks like BS that enabled this crisis.
The government has done a little to help the would-be homeowners, but it's not enough to stop the hemorrhage of people that simply can't repay their mortgages. And the Fed isn't going to bail you out by giving you float money to guarantee your payments to your lenders. Unless your name is BS.
What's worse, all these power suits that head up these large financial institutions are probably the same people that rail on government subsidies like welfare reform and the like (this topic is for another post, on another day). At the same time, they will gladly take Fed money to not have their company - and egos - collapse. Hypocrisy at its finest: a billionaire complaining that the guv'mint isn't doing enough for him when he has more money than the bottom 15% of Americans combined. The numbers might not be exact, but you see my point (this is easily Google-able, but I'm about to run some errands so I need to wrap this post up).
All I have to say is: cut the BS. Let them burn. No one's saving me from my bad decisions, financial or otherwise. I don't see why they should be saving BS from theirs. If free market works the way these assholes claim, the investors will find something worthwhile to put their assets in, and the economy will bounce back and right itself once enough people figure this out. Those that operate like BS should take the hit, and the fall.
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