I’m listening to the Bear call replay as I write this; I agree with your analysis that it seems to be to Bear’s advantage to make this seem more like a systemic risk event, rather than just a Bear Stearns problem, in order to prod the Fed into some action. Nevertheless, there are overall systemic and macroeconomic risks; it will be interesting to see what the Fed says on Tuesday. My guess: they will acknowledge some “turbulence” in the markets, and that’s it. Bernanke is probably too worried about establishing a reputation for encouraging moral hazard near the beginning of his term as Chairman. The Fed’s annual symposium at Jackson Hole at the end of August is apparently devoted to the housing market this year, so that ought to provide the next opportunity to reassess their view.

As for financials in general, it sure seems as though it might be a case of throwing out the baby with the bathwater; nobody seems to care to what extent an institution has limited exposure to the troubled areas of the fixed income markets. It’s like plutonium; if you’ve touched any of these areas at all, you’re contaminated and tossed from portfolios, no matter the other fundamentals of a respective business. I suspect that there might be some dedicated financial hedge funds that are in liquidation mode, as this selling seems quite indiscriminate to me.

Let’s hope rationality returns soon; I don’t have enough cash on hand to take advantage of many of these bargains LOL.

Steve