Let me see if I can sum it up in small words. Bear Stearns bought a lot of mortgage-backed securities over the past couple of years. These securities are curre

Let me see if I can sum it up in small words. Bear Stearns bought a lot of mortgage-backed securities over the past couple of years. These securities are currently worthless - no one will purchase them at any price. Bear Stearns has debts, but no assets = bankrupt. JP Morgan sought to buy Bear Stearns, but is unsure just how much of Bear Stearns' portfolio is worthless, so they're not sure how much they'd be willing to pay. So they got a bailout from the Federal Reserve. The Federal Reserve agreed to 'loan' $30 billion to Bear Stearns, secured only by - this is important - utterly worthless mortgage securities. This means that if BS doesn't pay the money back, the Federal Reserve can ONLY take those worthless securities and can't come after any other assets of BS or JPM. In other words...... it's free money. (If I loaned you $10,000 using a single toothpick as collateral and agreed that if you didn't pay it back, I could only keep the toothpick and couldn't go after any other assets you may have, that would be a gift, right? Would you pay back the money and get your toothpick back, or keep the money?) BS will never pay back the $30 billion. It's a free gift from taxpayers to the financial industry. Even with the free gift, JPM still didn't deem BS to be worth very much. Indeed, sinec BS's office building is worth $1 billion and JPM paid $236 million for all of BS including the office building, JPM forecasts that after the $30 billion gift, BS is worth about negative $750 million or so.