A Positive Review of the BearSterns Buyout

Working in the banking world, my perspective has been different from most everyone else. All I could think of was the BearStearns employees who went home on Friday working for an independent company, who came to work Monday morning as a wholly-owned subsidiary facing inevitable layoffs in the consolidation.

But the noise on the web has been largely outraged (even as Economists have praised the move) at this example of "corporate welfare". Many are charging that it was a waste of taypayer money, since the buyout was facilitated by the loan over the weekend by the Fed.

But there are some other voices worth listening to.

The Fed risking a few billion here and there to keep the boat afloat is the best trade possible today. Their action saved trillions in losses for investors all over the world. It is a relatively small price. If you want to be outraged, think about the multiple billions in subsidies for ethanol and the hundreds of billions of so-called earmarks over the past few years to build bridges to nowhere. And think of the billions in lost tax revenue that would result from the ensuing crisis. I repeat, this was a good trade from almost any perspective, unless you are from the hair-shirt, cut-your-nose-off-to-spite-your-face camp of economics.