Why Bear Stearns needed to be saved

If the government had not intervened, the fallout from Bear Stearns would have been irreversible. ‘Laissez faire’ simply doesn't work any more, explains Karim Rahemtulla.

It hasn't taken long for some rogue to capitalize on the Bear Stearns (NYSE:BSC) collapse - but I have to admit, it's pretty clever. I found a new dictionary definition today: To be 'Bear Stearned.' Meaning: To mess up, fail miserably, or collapse. As in: 'Wow, I really bear stearned that test.' But don't get the Oxford's English Dictionary folks on the line just yet. This obviously isn't official.

Joking aside, the Bear fallout reminds us of a critical driving force within the stock market the fear factor. In Bear Stearn's case, the fear was absolutely warranted, as investors piled out of the stock en masse on news that JP Morgan (NYSE:JPM) had swooped in to gobble up the company for a mere $2 per share. At that point, it didn't matter whether they thought Bear Stearns should be left to fail. They just wanted out. And fast.

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