Letter to the Editor on Bear Stearns Bailout

This Barrons Letter to the Editor on the Bear Stearns bailout exactly matches my view. Someone please explain to me why this is not correct?...

Bear Hunt

To the Editor: Re: the Bear Stearns bailout ("The Deal -- Rhymes With Steal -- of a Lifetime," March 24).

The rationale is always the same: We will use any and all means to keep bankruptcies of banks from spilling over into the real economy.

For those of us who are not investment bankers, this requires some explanation. What is perfectly clear is that Ben Bernanke and Henry Paulson are using someone else's money to help bankers: our money.

By swapping U.S. Treasuries for dubious asset-backed paper, and by providing no-recourse rollover loans to Bear, and by flooding the world with ever more dollars, these gentlemen are diluting the dollar. This amounts to taking a little bit of value out of every dollar-denominated savings account to pay the bankers and brokers.

The argument is that if the government doesn't take these actions, Main Street will be hit much harder than in the devaluation of their savings accounts. However, this isn't an obvious proposition. If Bear goes belly-up, so what? Won't the world go on? Won't Bears' assets go into receivership, same as if anyone else goes broke? Those who invested foolishly will lose their money, and be smarter next time. That's market discipline.

I don't fear Bear's demise as much as I fear the actions of those who would raid everyone's savings and ruin the dollar in order to dump helicopter-loads of money on this Wall Street problem. They act as though they are rescuing the market, but in fact they seem to be rescuing particular individuals and firms. The market is always there. Bottom fishers come in and pick the bones.

What would be the consequences of Bear failing without intervention? How bad would that be? Could it be that the good doctors' medicines are worse than the disease?

Frederick W. Horn Glendora, Calif

Original found here.