Their Bear Stearns, your money

Bear Stearns saga continues

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NEW YORK (CNN) -- Congratulations. You just bought Bear Stearns. You, me and all taxpayers.

We're not getting any ownership, of course, no share of the investment firm that at the beginning of the month had a stock market value of $10.5 billion.

That prize goes to JPMorgan Chase, spending a symbolic $2 a share of its own stock, which on March 16, the day of the deal, amounted to a measly $236 million. Even if Bear Stearns shareholders succeed in pressuring JPMorgan to raise its price slightly by a few dollars, for the giant bank it's just pocket change.

U.S. taxpayers are assuming the real cost of JPMorgan's buy: up to $30 billion to cover losses from Bear Stearns' lousy, risky investments in mortgage-backed securities and even more exotic investment paper that had plunged in value.

In similar fashion, U.S. taxpayers have suddenly become financiers of last resort for investment banks, thanks to the Federal Reserve generously opening up its discount lending window to securities firms to the tune of $200 billion.

That's on top of another $200 billion the central bank is offering to lend securities firms in return for their out-of-favor investments in mortgage-backed securities and corporate debt.

The Fed is trying to ensure no other investment firms suffer a Bear Stearns-style "run on the bank" in which trading partners collectively demand cash.

"It's like having a big brother stand behind you in the schoolyard," said Ray Stone of bond research firm Stone & McCarthy. "You're not going to get beat up."

We should all have such a generous and strong Uncle Sam, backing up our investments, no matter how risky.

Shouldn't there be a price for such protection? If our money is assuming the risk of schoolyard muscle, shouldn't we at least have the right to prevent those we're protecting from engaging in reckless behavior?

"Taxpayers should be asking questions," argues Nigel Gault, Chief U.S. Economist for Global Insight who wonders if other investment banks will need a bailout. "That's something which needs to be debated and decided in public if you're putting taxpayer funds on the line."

The Federal Reserve moved quickly with our taxpayer money to prevent a crisis far greater than the collapse of Bear Stearns - a company that made few friends on the Street by refusing to join in Wall Street's last major bailout, the rescue of Long Term Capital Management in 1998.

Ben Bernanke and company are trying to avoid a freeze of the capital markets, the source of funds for both companies and municipalities to raise the money they need to conduct business, expand and create jobs.

Bernanke, a scholar of the Great Depression, saw such risk in the sudden isolation of Bear Stearns. His quick, creative response has restored some market confidence in the past few days, and could well prevent our economic downturn from being as severe as it otherwise might have become.

But, now comes time to learn the lessons of this past week's crisis navigation. Let public scrutiny of Wall Street's leverage-happy risk taking begin.