Or maybe not - the Dow doesn't seem to understand that the economy is in real trouble. First it went up four hundred points after Bear Stearns collapsed, then it went down a bit, then up two hundred points again. I just keep telling myself that short term fluctuations aren't really important, but I thought people would be running for the hills by now.
I have to say I'm disappointed that taxpayer money is being used to bail out a bank without the government itself taking possession of, and selling off, the assets. Dean Baker's commentary has been very illuminating with regards to this matter, and it's due to him that I know there are other options - what the Bank of England did with Northern Rock, for example.
The bottom line is, these bad loans are going to have their negative effect on the economy - we can't avoid it. Better to expose them now, deal with them, and move on. But the Fed seems to think putting Bear Stearns into bankruptcy would cause even more harm, despite the fact investors still suspect it's virtually worthless.
I wonder what the government of China thinks about the fact that it's 10 billion dollar investment was sold for pennies on the dollar in closed door, fire-sale meetings? And why are the top people at Bear Stearns not out on the street?