Welcome to the Bear market

The economists and economic naval gazers at American Madness were blown away by the price JPMorgan paid for Bear Stearns this weekend. But we were more astonished at how the payment was made (with our money…yours and mine).

Well, at least the taxpayer got a good deal! Poor Jimmy Cayne walks away with about 1/100th of what his stock was worth just six months ago, and his billionaire friends have had big chunks ripped out of their wallets. Thousands will lose their jobs. It’s a sad story all around, except that it makes JPMorgan chief Jamie Dimon look like an absolute genius, all the more so because he’s managed to get the so-called financial supermarket idea to work for him, despite the failure of Chuck Prince to do the same at Citigroup (which makes great copy, since Dimon plays the role of Cordelia to Prince’s Goneril in the tale of their plutocratic father Sandy “Lear” Weill).

Many articles will say it better, but our two cents is that this bailout falls high in the moral hazard category. Some financial institutions should be allowed to fail. Some executives should have paid more attention to hedge fund blowups over the summer and less to the sporting life of cards and golf (or, for that matter, to writing movie reviews on their Myspace pages).

Is Lehman next?