One Year Ago Today: The Bear Stearns Bailout Started It All

The Wall Street Journal's editorial page is not what you would call critical of business. But today James Freeman, WSJ's assistant editorial page editor, has an explosive op-ed in which he argues that the bailout of Bear Stearns a year ago was a contributing factor in the size of the financial crash last fall - because it caused the rest of the finance industry to expect to be bailed out.

He writes, "If nature had been allowed to take its course, Bear's directors and executives would have faced the liability tsunami of bankruptcy, and creditors would likely have suffered as well. Watching this horror show, would the leadership at AIG and Lehman have spent more of the next six months seeking to avoid this fate?" Instead, after the Bears bailout every other financial institution expected to be bailed out. Freeman says that the Lehmans Brother CEO was "stunned" to find that his company was allowed to fail.

Here's what I wrote about Bear Stearns one year ago.

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