Bear Stearns bailout: Why is the Fed rewarding bad business decisions?
Posted Sep 13 2008 11:53pm
In today's Associated Press, Bear Stearns, the nation's fifth largest investment bank received an emergency infusion of cash from the Federal Reserve and JP Morgan. Bear Stearns is facing a cash liquidity problem following their massive investment failures revolving around heavy investment in mortgage backed securities. Specifically two large hedge funds, owned by Bear Stearns, that had made unwise investments in the now problematic subprime mortgage market began to collapse this past summer. This move is seen as a last effort to save the large 86 year old investment bank from collapsing.
Why are we bailing out businesses like Bear Stearns that made poor strategic business decisions? They took the risk and the game is up and not in their favor..... isn't that how the free market system is supposed to work?