Bear stearns had pledged 104% of their capital. They weren’t the only one in such a condition, and in this sense it is unfair, but the closing down was justified.
The law was changed from “mark to market” (the standard evaluation for decades) to “Mark to fantasy” specifically so that many bankruptcies would not need to be declared - but without a $700B injection at the time, many more would have happened.
You cannot have consistent book keeping if two entities can book the same item at the same time for materially different values at the same time. It is as simple as that.
Bear stearns had pledged 104% of their capital. They weren’t the only one in such a condition, and in this sense it is unfair, but the closing down was justified.
The law was changed from “mark to market” (the standard evaluation for decades) to “Mark to fantasy” specifically so that many bankruptcies would not need to be declared - but without a $700B injection at the time, many more would have happened.
You cannot have consistent book keeping if two entities can book the same item at the same time for materially different values at the same time. It is as simple as that.