Bear Bailout Called 'Worst Mistake in a Generation'

A former top-ranking Fed official has called the central bank's decision to bail out Bear Stearns its "worst mistake in a generation," the Wall Street Journal reports. The official, former chief of monetary policy, compares the hasty move to errors that helped trigger the Great Depression. He accused officials of ignoring other options, such as demanding more from buyer JP Morgan, seeking other suitors or removing certain assets from Bear's portfolio.

The bailout of the troubled bank "eliminated forever the possibility the Fed could serve as an honest broker," said Vincent Reinhart , now at the American Enterprise Institute. Now any time a financial institution is in trouble,"The reasonable question any person in the room will ask is, 'How much will you contribute to the solution?" (More Bear Stearns stories.)