Really too big to fail?

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The weekend of March 15-16 culminated in the dramatic bid for Bear Stearns by JP Morgan. In the aftermath of this stunning development, there has been much talk about the disastrous consequences that were avoided. It is clear the psychological consequences of such a failure would have compounded an already fragile liquidity problem. For this reason alone, the US Federal Reserve was well advised to seek a resolution that allowed the business of Bear Stearns to continue. In less fraught market con