Land of Confusion

Ooh superman where are you now
When everything's gone wrong somehow
The men of steel, the men of power
Are losing control by the hour
--Genesis

I've heard a number of commentators opine that yesterday's buyout of Bear Stearns (BSC) by JP Morgan (JPM) was not a bailout and didn't invite moral hazard. How can such a deal promote moral hazard, they argue, given the carnage in BSC stock and the thousands of Bear employees likely to soon hit the bricks?

Get real. Anyone with eyes can see that this deal was cobbled together to protect the broader interests of those lugging excessive risk and who stand to be crushed in a credit market seizure induced by the insolvency of a major broker dealer.

And, indeed, the risk takers were back in gear only one day after their reprieve, walking the Dow up 400+ points today.

It does appear that we've transformed into a Bailout Nation, willing to privatize gains and socialize losses. Ironically, this intervention does nothing but increase the wealth divide that so many complain about.

The meddling also increases the potential energy of market forces currently being restrained from a natural cleansing process.

At some point, however, these forces likely won't be denied.

no positions