Bear Stearns Is The Goat

I have been reading The Histories(Herodotus) by Herodotus which was given to me a two years ago by my coworkers. I regret not having read it sooner.

I never knew the origin of “scapegoat” until I read Book II. Apparently, it was a pretty common occurrence in ancient Egypt.

Having poured libations of wine over the alter so that it runs down upon the victim and having called upon the god, they cut its throat, and having cut its throat they sever the head from the body. The body then of the beast they do flay, but upon the head they make many imprecations first…The form of the imprecation which they utter upon the heads, requires praying that if any evil be about to befall either themselves who are offering sacrifice or the land of Egypt in general, it may come rather upon this head.

This vision is fairly appropriate when considering the fate that befell Bear Stearns. I believe the market is currently praying that this fate does not befall the other financial institutions.

The Fed’s move today, though brutal and swift, was completely necessary. Rescuing troubled banks and providing cheap loans to floundering banks (“the discount window”) is the reason the central banking system exists.

If we are going to bail out banks and provide discount loans, let’s call it a bail out and a discounted loan. Let’s make it transparent. And furthermore, let’s make sure the culprits are held accountable and made to pay the costs in the long run. And lastly, let’s make sure the appropriate regulations are put into place so this doesn’t happen again.