A financial columnist says if Wall Street banks were not so interrelated, the government could have easily allowed Bear Stearns to collapse due to its questionable hedge fund practices and embracing of the subprime mortgage industry.
The chairman of Bear Stearns, James Cayne, sold his stake in the investment bank after J.P. Morgan Chase raised its offer for the failing bank from $2 a share to $10 a share -- netting Cayne about $61 million. New York Times business columnist Gretchen Morgenson says there is a key lesson to be learned from Bear Stearns' collapse. "Firms that we have thought were on very solid ground can very quickly lose that footing," she warns. "[A]nd it's kind of been a real wake-up call ... for investors because a lot of what these firms rely upon is the confidence of the investors in the marketplace." Morgenson also warns that once an investment company loses the confidence of their investors, "it's only a matter of moments before they really can be on shaky ground." The financial columnist says even though millions of troubled American homeowners are finding that they have few alternatives and feel it is unfair a large Wall Street firm is getting a bailout and they are not, "the big Wall Street firm has so many powerful trading partners that if it failed it would also hurt very drastically." Morgenson also notes that not one of the presidential candidates has yet put forth a "detailed and well-thought out response" to the country's home mortgage crisis. However, both Senators Barack Obama (D-Illinois) and Hillary Clinton (D-New York) have been criticizing Republican presidential nominee Senator John McCain (R-Arizona) for opposing government intervention in the mortgage crisis.
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