This is an excellent commentary in Bloomberg about the unintended consequences of the Fed's rescue of Bear Sterns (and most of the rest of the gamblers...um, I mean investors) on Wall Street. The gamblers now have an implicit Fed backstop, if they are foolish with their money, they will get bailed out. So much for "free" markets and Adam Smith. The results I believe are best seen in the commodity markets. The investment banks are throwing buckets of money at the commodity markets (because commodities are the only thing rising at the moment) which they received from the Fed in exchange for their worthless investments in housing. Of course this foolishness carries the seeds of its own disaster.
Did I mention that Lehman brothers has $31 dollars at risk for every $1 that they actually own? This is called extreme leverage and one makes a lot of money from it as long as the underlying investment is increasing in value. When it decreases you get Bear Sterns. These guys are nothing more than reckless gamblers using Fed money.
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