That's great that the Fed isn't thrilled with yesterday's quintupled Bear Stearns stock bid because it did not want to be seen as using taxpayer money to rescue BS equity holders. I have an uncomfortable feeling that is exactly what is going to happen, as JPMorgan Chase seeks to "pacify angry Bear shareholders" with the sweetened offer.

Why the nerves? Because surely more fraudulent borrowing will hit BS's already rotten balance sheet. We surely haven't seen them all yet, the homeowners in foreclosure who pushed all their credit card-bought Caribbean getaways and flat-screen TVs onto their mortgage debt--all residually tied back to BS and other lenders, and all coming back as a big fat loss. Guess who'll end up paying for it? For my money, it's all shaping up as a $30 billion taxpayer check written straight out of the Treasury Department.

Watch out mutual fund investors, your retirement might be subprime-backed.

Troubling, too, is that JPMorgan was asleep at the wheel when signing its guaranty agreement with BS. James Dimon, JPMorgan’s chief executive, was reportedly “apoplectic” after discovering an unintentional loophole which paved the way for BS's shareholders to chase a higher bid while locking in JPMorgan's guarantee obligation.

I wholeheartedly agree with the NYT reader who wrote thus: "The Fed did a good job of orchestrating this deal so that Bear Stearns shareholders got something instead of nothing while preventing a systemwide meltdown. JP Morgan did a good job stepping up to the plate and will likely get rewarded for it if the deal goes through largely as currently negotiated. However, the Fed action should not turn into a reward for incompetence. Get the deal done and get it done NOW!"

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