[GocartMozart]

the thing with all of this is that the blame isn't just at bear, or at any single firm. this was a set of circumstances that all came to fruition because of faults with the entire system, the rating agencies, the insurers, the regulaters, the fed, the treasury department, Fannie and Freddie. There is so much blame that you don't where to start. The fact of it is that I don't blame bear stearns. They were trying to make money and had hedges in place, if the markets equate those hedges to nothing because the pricing mechanism is by defition whether a buyer and a seller can agree to a price, yet there are no buyers i.e. no liquidity, there isn't much you can do about that as a bank. how do you predict that the markets with create a situation where no confidence in counterparties.

this is a genie out of the bottle situation. derivative contracts will never disappear and are by their nature simply a contractual exchange of cash flows. it's a 560 trillion dollar market and by far the largest financial market on the planet. by their nature the two parties to the contracts must have faith in each others credit and ability to pay the agreed upon sums. If those assumptions are not applicable, ask the question "What is the price of this contract if no one wants to buy this contract?" The answer = zero. Bear may have been more leveraged than others and lacking the requisite liquidity to match such a catastrophe, but this is imo the largest banking crisis in the history of financial markets. the bailing out of the fed during the great the depression by the major banks is up there, but this is a significantly larger animal with global implications. In the end of the day I'm really not worried about how the markets will function a year from now since the markets are probably evolving or even going through puberty. The world has changed and the financial markets have to catch up and reassess their assumptions.