Federal ReserveBank

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"The real question is who is next?" wonders Michael Greenbergerof the University of Maryland School of Law. "If Bear Stearns canbe discounted from $30 per share to $2 per share in 48 hours, itcan happen to anyone" says the former director of the Division ofTrading and Market at the Commodity Futures Trading Commission anda former member of the Steering Committee of the President'sWorking Group on Financial Markets. Today he teaches a law courseat the University of Maryland on mortgage related financialproducts.

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There are real concerns that there are other investment bankswith MBS heavy portfolios that are similarly situated, he tellsGlobeSt.com, and could just as quickly find that the market hasconcluded that their own internal valuations of their stock andassets are grossly overpriced. It is legitimate to wonder how manytimes the Fed will be stepping in--or should step in, he says.

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Federal Reserve Bank chairman Ben S. Bernanke's push for abailout didn't do any favors to taxpayers, Greenberger notes, as itis essentially guaranteeing $30 million worth of Bear Stearnsassets that are illiquid. These mortgage related instruments, hesays, for which the Fed is taking over "are untradeable andvirtually worthless. When Bear Stearns goes from $30 per share to$2 that is because of the poor valuation of these instruments. Theycannot be used as collateral and only the Fed is willing to takethem on."

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Marc Louargand, current president of the American Real EstateSociety and chief investment strategist with Cornerstone RealEstate Advisors, agrees there are other "Bear Stearns out there.The issue has gone way beyond MBS and is now endemic throughout theentire credit system--anyone who has leverage on their balancesheet is at risk," he says.

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Louargand acknowledges critics complaints about the bailout aslegitimate concerns--but says the Fed could not have permitted BearStearns to fail. "It is doing what it is supposed to do right now,"he says, "which is supply liquidity to the financial markets."

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