JWM in SD – yes you read what I’m saying correctly. The Fed is trying to “limit” the failures to the extent they can, and restore counterparty trading confidence. Solvency is an interesting question – they are liquid to the extent that they have access to credit. Bear up till last week had access to liquidity. Then for whatever reasons- their counterparties started calling in their loans, their prime brokerage clients demanded cash outs as the rumors furthered, other banks started assessing premiums to trades Bear was doing. Maybe these are the same guys who wanted Bear to eat crow since Bear refused to participate in the bailout of LTCM in the late 90s. All the banks are heaviliy leveraged. In the past many years, credit was free flowing – hence all of our issues today. The banks created the monster, and the geniuses themselves bought into the BS (that would be bullshit, not Bear Stearns although a running joke on Wall St)….now they are all trying to call each other on the BS by calling in their loans. They suffer from their own belief in the monster they created, and now from the lack of confidence in it.
I for one have no idea if what the Fed is doing is for better or for worse, but as I posted in the other thread on pros and cons, if we end up in a depression – will the Fed be damned if it sat idly by and did nothing? Truman once said he wished he could find a 1 handed economist – economists are often found saying, on the one hand…., on the other hand…..
