bruin532

Bear Stearns Shareholders Sacrificed for the Economy

It comes back to the arguments MORAL HAZARD VS GREATER GOOD theory. Case one: Better to have the Fed action than to loose the economy. We see all people through the fed taking action for all people to be rewardwd/protected ie the economy. Case two: Not so in Bear the greater good is being applied but Bear is forced to take the greater pain. The ability to access the discount window was offered to other investment banks like GS but only after the deal was struck. If this same openig had been made only hours earlier Bear would not have gone down and the shareholders pension etc whould not be carrieing the burden pain for the greater good.