Now that the U.S. government has stepped in to help JPMorgan broker a bailout of Bear Stearns and offer last-minute credit to failing Wall Street firms, the Wall Street Journal lays out the possible outlines of a broader response to the U.S. financial crisis, noting:
The result is likely to be a heavier hand of government in the form of corporate bailouts, fiscal incentives and regulation.
Much of the emergency action taken so far, including Sunday's decision to extend central-bank loans to Wall Street brokerage firms, has been driven by the Fed. That possibly insulates Congress and the White House from steps that eventually could be costly to taxpayers, although at present the Fed considers that unlikely.
The Bush administration is mulling additional fixes to America's wounded housing-finance sector, where the crisis erupted last summer. One step the White House is actively considering involves reducing constraints on Fannie Mae and Freddie Mac, government-chartered companies that play a huge role in financing mortgages. The two companies have been operating under elevated capital requirements for the past few years because they were caught up in accounting scandals. Under the plan, those requirements would be eased so the companies would have more money to buy mortgages from banks desperate for liquidity.
The New York Times breaks down the run on Bear Stearns, summarizing the bank's stunning downfall and subsequent sale as either "a heroic rescue of the financial system or grand theft, Wall Street style. Maybe it was a bit of both." Either way:
Make no mistake: this was one of the greatest corporate euthanizations of all time. And Wall Street played its own gleeful role in it.
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