Great Thoughts from the Fed

The most interesting thing about the Federal Reserve's comments on the Bear Stearns bailout is how uninteresting they are.

According to the March 14 minutes: "Board members agreed that, given the fragile condition of the financial markets at the time, the prominent position of Bear Stearns in those markets, and the expected contagion that would result from the immediate failure of Bear Stearns, the best alternative available... " was to help JP Morgan Chase buy its rival two blocks down the street. Beyond that, the minutes cite "unusual and exigent circumstances."

The reasoning is a tautology underscored by a cliche. Why exactly were the financial markets fragile and why would a Bear bust lead to a contagion? There is also nothing to indicate why the Fed thought that JP Morgan would need its help, as opposed to being able to secure financing in the market, fragile though it may be. This is especially true since the Fed makes pains to point out that the loan would be "fully secured."

I suppose that the minutes don't unveil the high-level financial pontificating that was going on behind the scenes. But this is what they released, so presumably the Fed maestros thought it made them look good. Where is the data? What's the evidence?

It's also possible to argue that the forecast contagion was arrested, so the Fed's plan worked. But it's also possible Bear could have been bought (for a pittance) without the Fed's intervention.