What's the Reasoning Behind the Three-Way Rescue of Bear?

On the heels of Monday's 'Spitzering' of Bear Stearns (BSC), some are wondering why the U.S. didn't just acquire the ailing Wall Street firm itself, rather than handing what many believe is a substantial windfall to JPMorgan (JPM). While it is hard to know for sure, here are some possible reasons for the central bankers' approach:

They wanted to reinforce the fiction that the market is healing itself through private-sector solutions, which policymakers assume will inspire a greater sense of confidence than through direct bailouts.

They didn't want to open up the can of worms associated with the government effectively setting market prices, because it might have the unintended consequence of making investors and others even more uncertain about valuations, more worried about counterparties' health, and more defensive in terms of their investment strategies than they were previously.

They wanted to avoid ratifying the suddenly popular belief that large and troubled financial firms will be bailed out, hoping to minimize moral hazard implications that would almost certainly be worse following a direct acquisition.

They are (still) hopeful that the current crisis is a sudden squall that will soon blow over, so there is no need to think past stopgap measures.

In the end, though, these efforts will turn out to be nothing more than a band-aid on a gaping knife wound as other large and well-known financial operators eventually find themselves in the same straits as Bear.