Misunderstanding the Bear Stearns deal

E.J. Dionne:

Never do I want to hear again from my conservative friends about how brilliant capitalists are, how much they deserve their seven-figure salaries and how government should keep its hands off the private economy.

The Wall Street titans have turned into a bunch of welfare clients. They are desperate to be bailed out by government from their own incompetence, and from the deregulatory regime for which they lobbied so hard. They have lost "confidence" in each other, you see, because none of these oh-so-wise captains of the universe have any idea what kinds of devalued securities sit in one another's portfolios.

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The market can be an unforgiving place for those who invest in the wrong securities. But it is absurd to suggest that the Bear Stearns deal turned the investment bankers into welfare clients. Such statements demonstrate a gross ignorance of the transaction. What happened was a liquidation at below bankruptcy prices in order to bring some stability to the market place and keep the mortgage market open for home buyers. The owners and employees of Bear Sterns took a real hit that the people who walked away from their houses and mortgages avoided. Dionne's lack of comprehension of this fact exposes his liberal bias and the ignorance that comes with it.