After Bear Stearns, Who May Be Next?

However, "there's not the same questioning of their franchise. It's not anyone saying, what are they going to do for a living next year," said Tanya Azarchs, S&P banking analyst. "At the same time, though ... the markets are very nervous, very skittish. Asset prices are very volatile. The repo markets are very tight, very illiquid. When the repo markets are illiquid, things can get very unpredictable."

The repo, or repurchase, markets are temporary loan markets that are relied upon by banks, hedge funds and other investors to invest their extra money or borrow against collateral.

Q: What will happen to Bear Stearns?

A: Few industry experts believe the 28-day loan will be enough for Bear to become liquid on its own again most are viewing it as delaying tactic as Bear and the Fed figure out how to proceed.

It is possible Bear will be bought, perhaps by JPMorgan. If that happens, the buyer would have take over Bear Stearns' $176 billion worth of distressed securities and its $42 billion in loans not a rosy prospect for even a healthy bank. Furthermore, there are regulatory issues that may arise if a commercial bank wants to buy Bear's troubled assets.

Another scenario is that the Fed attempts to organize an orderly winding down of Bear Stearns into a much smaller company by selling off its assets.

Q: How is Bear's loan different than other steps troubled financial institutions have taken?

A: Bear Stearns is not the first company to seek out cash Citigroup Inc., Merrill Lynch and Morgan Stanley have pulled in several billion dollars by selling stakes to outside investors, including foreign governments, while the bond insurer MBIA Inc. sold a significant stake in itself to JPMorgan, Lehman Brothers and other investors.

But Bear Stearns' agreement with JPMorgan is not a stake sale it's financing planned and backed by the U.S. government.

Q: Why can't the Fed just let Bear Stearns collapse?