I think this is a hard issue to be objective about. On the one hand, with the economy almost certainly on a downward spiral, I'm not sure that the Fed didn't do this out of what I might euphemistically call "a sense of urgency" to help stabilize the financial system. Or, if you're not into euphemisms, "panic" might be the operative word here.
In any event, I really don't find this to be a good decision on at least a couple of points. First, the Fed guaranteed JP Morgan that they would not lose money on the buyout, and that ultimately means our tax dollars at work. Secondly, it isn't clear that the buyout benefited Bear Stearns stockholders.
This story suggests that they might have been better off if the company were liquidated. In this context, I really have to wonder that so many so-called analysts were surprised at Bear Stearns liquidity problems.
Let's set the Wayback Machine for June 12, 2007.
Finally, I'm not sure that the Fed's action did much to ease fears about the financial market. I mean, if you have stock in an investment bank, don't you really feel as though you may the the last (hopefully) uninfected person in the middle of a cholera epidemic?
But, I don't mean to sound too glum. So for a moment of comedy relief check out Bear Stearns
homepage.