The market mavens this morning are gnashing their collective teeth over the government's bailout of Bear Stearns (yes, that means you and me; look who took on the risk on the company's craptastic mortgage-backed assets). Many are caught between relishing the taste of just desserts for one of Wall Street's bad boys and fear that its bankruptcy would act like a snowball dropped at the high point of a snow field.

The government's largesse, routed through JP Morgan Chase, demonstrates the peculiar nature of large debts, one familiar to many failed small businesses. When you allow a customer's debt to represent too large a percentage of your cash flow, you yield power to him. When he can put you out of business by delaying paying his debt, you are no longer in the position to control your own destiny. He owns you.

Bear Stearns appeared to have reached a similar point, at least in the view of the Fed. Despite being responsible for fouling its own nest, the prospect of BS's bankruptcy caused the Fed to blink. In the short run, investors may be heartened by the rescue. At the same time, I envision corks popping in other investment banks, where the pressure to minimize risk has been alleviated. The line has now been established, I guess; any investment less foolhardy and reckless than those of Bear Stearns now has the government's stamp of approval.

Meanwhile, a few more billion of your public dollars are now backed by subprime loans. This morning, I feel sorry for the suckers of the Nigerian Scam. If they had a few billion at risk, the Loan Arranger, played by Ben Bernanke, might have ridden to their rescue, too.


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