Essentially you paid for this bailout (I will cover why it is a bailout below) by the Fed devaluing the money you currently have by printing more money. This cost YOU money.

Sure allowing Bear Sterns to go bankrupt would cause a lot of turmoil in the market, but it would recover, and fairly quickly once the excesses are out. Plus, not allowing Bear Sterns to go bankrupt tells the other investment banks to keep doing the samething that got us here, as the Fed is telling them “will save you.”

It is a bailout, as Bear Sterns would have gone to zero without the Feds help. All their assets were fleeing with their clients and no one was hiring them to do the investment banking side of any deals (they had no assets or leverage), thus no fees were being generated. They obviously aren’t making any money from their investments right now, so the drop in fees would have meant they would eventually go under. This cycle, unfortunately, is almost impossible to break, as it is a crisis of confidence. Would you have risked your millions with Bear or with Goldman Sachs right now? It’s rhetorical, as we all know the answer.

Note that the very brief reasons I gave here are only a very very very small part of the entire debacle.