Kudlow: Bear Stearns a Sacrificial Lamb

Larry Kudlow writes that Bear Stearns didn't have to go belly up, but instead could have survived if the Fed had lent a helping hand earlier. Kudlow says that since Glass-Steagall was repealed several years ago, the Fed should have modified its policies to allow broker-dealers (non-banks) receive short term funding via the Fed's discount window. Thus, Bear was unjustly punished.

Kudlow has a great point, but Bear Stearns also has itself (and its customers, whose confidence was drastically eroded) to blame for its problems. Since the credit problems began last August, Bear has had several opportunities to get rid of some of its assets and shore up its balance sheet, but decided it wasn't a great market environment to do so. And its precarious funding situation and penchant for high-risk, high-reward assets was the firm's ultimate downfall.