Bear Sterns was always known in the investment banking community as a 'gun-slinger'. Very few people acquainted with the industry would be surprised that they were the first to hit the wall. The fifth biggest US Investment Bank going south might be a blow to confidence, but it is hardly an earth shattering blow to the financial system.
They should have just been allowed to go under, for several reasons-
1- Investment Banks are not commercial banks. They have never been regulated by the Fed, neither was it ever the Feds mandate to act as Lender of Last resort for them. So why now? Why is the Fed spending $30Bn of
your money to bail out a bunch of gunslingers it was not even responsible for regulating? Why is it buying (at massively inflated prices) Junk securities it never before bought- these are not government backed securities?
2- The taxpayer has funded a $30 billion purchase of their absolutely most Junk securities. Why? Since when has it been
Your responsibility and liability to bail out the rich shareholders of a business that fails?
3- Moral hazard (1)- thus, the basic component of risk has been removed from the financial and business equation. I take money off the investing public, and use it for largely unregulated high risk lending activities. I lose the money. The taxpayer bails me and the other shareholders out. Great stuff, what a Gravy Train! I may as well keep doing it then, it's a no lose game.
4- Moral Hazard (2)- As part of the regulatory shift accompanying this bailout, the US Federal Reserve has had it's powers increased. It's mandate is no longer just money supply and the Commercial banks- it now has been, or is in the process of being granted, sweeping powers over other parts of the financial system including Investment Banks, Financial Advisers and so on. Kind of like the FSA of the UK, but with one important difference- The Fed is NOT a government body- it is a private company. It has NEVER even been audited by the US government. Even it's shareholding structure is opaque. Congratulations America- you've just handed the last shreds of your financial self determination to a bunch of non-government bankers.
Moral Hazard (3)- Well, if we couldn't let Bear Stearns go under, then we can't possibly let Lehmanns go under can we? They're even bigger. Neither Merrill Lynch- they're bigger still. Neither.......
[insert next rumour] So who pays for all this? Oh, thats right, the Taxpayer.
What was that old saying, 'the business of America is business'. Wrong- this ain't Capitalism, this is Socialism, plain and simple. A new form of Socialism though- Socialism to benefit the Rich at the expense of the Workers. Maybe someone will have to invent a new political term for it- "Corporate Socialism" perhaps.
5- With it's 'Cheap Money' policies, the Fed bears a
Lot of the responsibility for this crisis in the first place. Easy money leads to such things as- excessive financial speculation, debasement of the currency, rising commodity prices, real estate bubbles and excessive debt in the monetary system- ring any Bells? So in a classic piece of Bush administration logic, the response is to reward this Private company the Fed with sweeping new powers.
Just out of interest, because I'm sure you don't want to see these poor Wall St banker types suffering now do you?
I just thought I might end with something thats bound to give all you Corporate Socialists a warm glow-
In 2007, Bear Sterns paid out US$3.2 billion in bonuses to it's Executives. How sweet life is in The Hamptons. 
The Bush administration has unequivocably lost any shred of moral, business, political, foreign policy and social credibility. It has no philosophical credence remaining. All it has left is the size of it's (taxpayer funded) Armed Forces.
Right Wing Conservatives, that was their political mandate to the public. Conservative means- Record government debt, record debt in the economy, record spending on foreign wars, looming recession, US dollar tanked, US economy still running massive trade deficits. Conservative budgeting? Massive tax cuts to the rich.
Conservative business/ Capitalist philosophy? Taxpayer funded bailout of non-regulated financial institutions. No Bid contracts to allies of the government (50 billion for Halliburton alone). And so on.
We'll have to see how the Republican party recovers from the Plane wreck of the Bush administration, given time, but right now it's credibilty and philosophy lie in tatters.
