Bailout

Bear Stearns CEO, James Cayne, made over $50 million today thanks to the Federal Reserve guaranteeing Bear Stearns losses with taxpayer money.

You might recall that Bear Stearns, whose investment strategy resulted in mortgage hedge funds it ran liquidating leading to a loss of investor confidence and a stock price meltdown from over $150 per share to $30 per share on March 13. Over the weekend of March 14 and 15, the Federal Reserve blessed a buyout of Bear Sterns by JP Morgan for $2 per share on March 16.

The deal allowed Bear Stearns bondholders to avoid losses as a result of pending bankruptcy even though shareholders got hurt. Since the bulk of Bear Stearns shareholders were their own partners it was argued that the financial pain for their poor decisions was justified.