Bear Stearns, the titan of Wall Street, was once worth $20 billion. By last Friday, it's stock was selling at $30 a share and this week it was purchased by J.P. Moran for $2 a share, a total value of $236 million. They either had to sell or file for bankruptcy. How could J.P. Morgan absorb all the bad debt that's driving Bear Stearns into the sewer? Easy. The Fed is funding up to $30 billion of Bear Stearns' riskier assets. The Fed. That's us. The taxpayers. The Wall Street Journal said this "is believed to be the largest Fed advance on record to a single company." It also said, "if the assets decline in value, the Fed -- and thus, the U.S. taxpayer -- will bear the cost." If you remember, Bush said he won't sign any bill that bails out homeowners. But we'll pay billions to bail out financial institutions. Whatever happend to taking responsibility for your actions? Shareholders could file lawsuits if there's suspicion that the executives of the company knew on Friday that the company had lost most of its value (ya think?) but decided to keep that information from investors. (Washington Post) Yeah. That worked real well with Enron, didn't it?
 
Last week President Bush said he wouldn't go along with any intervention in the housing market. (White House) Guess he was talking about the little people, because these $30 billion in assets are primarily bad mortgages. Then he said on Saturday the market was correcting itself. (White House) If it's correcting itself, why do we taxpayers have to go into debt for it? I think beyond his denial syndrome, Bush just doesn't have a clue about what's going on out here.
 
Inflation last year was 7.4%, the highest rate since 1981. Home prices fell 8.9% in the 4th quarter last year, which is the steepest decline in 20 years. The increases are largely being fueled by higher energy and food prices. You know, the stuff that we all need. According to the LA Times, this is adding up to the worst consumer confidence in 5 years. Fed Chair Ben Bernanke said he's ready to continue cutting interest rates. Despite new evidence that inflation is increasing, Bernanke made clear that his primary concern continues to be the possibility of a recession rather than fighting inflation. (NY Times) Ever since the country was hit hard by stagflation in the 1970s, the rule of thumb in monetary policy has been that revving up a slow economy is far easier than slowing inflation once it becomes entrenched. (See Monetary Policy and Fiscal Policy) Allan Meltzer did an op ed piece for the Wall Street Journal last week saying that the Fed seems to be making the same mistakes that led to stagflation. "One lesson of the inflationary 1970s: A country that will not accept the possibility of a small recession will end up having a big one." He said the Fed should follow the example of the European Central Bank, which is focusing on economic growth as well as inflation and "doesn't shift back and forth from one to the other."
 
Other problems? Job losses (Bloomberg), loss of home equity (LA Times), oil prices -- probably going to $200 a barrel (LA Times), people draining their savings to pay the bills (USA Today), retail sales, the only economic engine we have left, in the toilet (AP). Things are so bad many people are paying their credit card bills "before, and sometimes instead of, their mortgages." (USA Today) And, what's worse, our dollar isn't worth anything. Check out this quote from the AP:  "Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies."
 
Go have a beer if you can still afford it.