I’m kind of a small-L libertarian at heart and this bailout shit drives me nuts. BUT…..

It wouldn’t bother me nearly as much if the Fed had said, “OK, we’re going to take on this collateral for 28 days (or whatever the term is that the JP Morgan conduit is using) and at the end of that 28 days we’re going to mark this crap to market – REAL market – and it’s going to come out of Bear Stearns’ common equity. That would basically be saying, “OK, folks, we’re going to save you bond holders in this one, but you equity holders get zippo. Zilch. We’re taking the losses out of your hide.”

At least this would scare the piss out of investors without causing any additional pain on the debt/liquidity front. I feel the same way about some of these banks. I’m not as ardent about wiping out the debt holders (assuming there are more bailouts)… but the equity holders should get nothing. You want to organize a government-sponsored bailout of Citigroup, Fannie Mae, etc.? Fine. But they get re-capped at $1 per share. That’s the way the cookie crumbles when you’re at the bottom of the balance sheet.