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Taxpayers Bail Out Bear Stearns; JP Morgan Buys for $2/Share Discount

In the past 72 hours, the ultimate financial scam has been perpetrated on the American public.
 
 
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A couple of months back, I wrote the following:

The unprecedented wealth transfer from poor and middle income families to the uber rich is nearly complete. The folks at the bottom of the GOP-led financial pyramid scheme are nearly bled dry, and the pyramid is about to collapse. To sustain itself a little longer, the folks at the top of the pyramid will have to start an Amway-style ritual of financial cannibalism amongst themselves. I think that (to an extent) this is exactly what we're seeing in the stock markets and big financial houses as the true meltdown begins...

On Friday, it was announced that JP Morgan Chase Bank was acting as an intermediary to bail out the financial investment bank Bear Stearns, and essentially funneled billions of dollars from the U.S. Federal Reserve (read: you and me) to those who had entrusted their investment fortunes to Bear Sterns.

I don't even know where to start on this one. How about here?

So the only possible justification for such Fed action is to engineer an orderly rather than a disorderly shutdown of this institution. But unfortunately the Fed is behaving as if Bear Stearns is illiquid but solvent. That is delusional and the official sector support of an otherwise insolvent institution will end up - like many other recent Fed actions - being paid for by the US tax-payer...

On Friday, Bear Stearns stock closed at $30 / share, down nearly 50% from the prior day.

Today, J.P. Morgan Chase agreed to buy Bear Stearns for $2 / share. You read that right.

$2 / share.

Richard Blair is the blogmaster of All Spin Zone .

 
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