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Don’t bet against one more Bear Stearns performance

All market participants must still confront the reality of near total market failure across the debt and money markets, an inability to sell even quality assets for cash or to borrow against them and a complete loss of faith between financial institutions. More public money is surely coming, but how can it repair this?

The disappearance of Bear Stearns over a weekend (well, two weekends) is an emotionally charged piece of theatre. The moment of high drama was all the more loaded symbolically for all its well-rehearsed movements and staging being so reassuringly familiar.

Here we have the frantic bankers, struggling to shore up their once sturdy institution as the run gathers momentum. The wealthy private sector executives are brought to heel by truly powerful government leaders, half-glimpsed dispensing their judgments from just off stage and grappling with a greater burden: not merely the fate of little Bear Stearns but the survival of the very system itself lies in their hands.

There are the moments when no deal seems possible, then the breakthrough when JPMorgan commits itself to stand behind the broken firm, after less than two days’ due diligence and with no material adverse change clause to fall back on if it turns out to have bought a swamp-full of toxic waste, but only if the Fed guarantees to finance $30 billion of questionable collateral.

The tired participants call for deliveries of Chinese food, planes start landing with other bank CEOs recalled to the US from around the world to witness the final sacrifice: Bear Stearns is dragged to the edge of the pit and cast in.

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