That did not take long - Bear Sterns use of FED bailout

Implications: 1. Market reacts to Bear liquidity and FED temporary bailout plan by dropping over 200 points. 2. Will market continue to yo-yo as these events happen. 3. Will FED change plan if Bear fails?

Analysis: This morning the news of an overnight liquidity problem (confirmation of weeks of specualtion) for Bear Sterns raised the issue of  the new FED 28 day loan process. Bear will be able to pledge assets and receive a 28 day loan while Chase tries to find permanent financing. As the article points out, there is no quarantee they will be able to find that fianancing.
This morning the market dropped well over 250 and then bounced back minutes later with a 100 point recovery. Then it has been an additional 50 point loss and an 50 point gain all in the last 10 minutes. Quite a bit of yo-yo action. Volatility will rule the day.  
So here we go with the FED giving money for discounted mortgages at PAR for 28 days. Bears stock dropped over $20 a share this morning in just an hours time. So what happens in 28 days if the stock is junk and the loans are less than the collateral value they support? Will the FED bailout the Bear or will it force them into Bankruptcy. More likely is that they will let them pledge more loans and create another 28 day note. 
The liquidity issues that are going to hit these mortgage holding investors is going to continue. In addition their capital levels will continue to be under pressure as the stocks take their additional hits.

So the real question becomes will a 28 day reprieve be enough to save one of the top investment houses and will the FED be left holding the bag.