Why did the Fed bail out Bear?

I've gotten that question a lot over the last few days.  What, my questioners want to know, made Bear more worthy (or needful) of a bailout than Lehman.

Answer:  nothing but timing.  The Fed gambled that by supporting Bear into a quick sale, it could stop the liquidity crisis and prevent the contagion from bringing down the broader market.  By the time Lehman fell, it was clear that this hadn't worked.  Moreover, the bailout had introduced a serious moral hazard problem into the market:  AIG (and allegedly also Lehman) turned down private offers that were too paltry in the belief that the Federal Reserve wouldn't let them be forced into liquidation.  Other bankers required an object lesson.

Too, by that point, the various institutions involved had had some time to work out contingency plans for such a collapse.  They weren't complete, but they were adequate.  With Bear, on the other hand, it would have been utter chaos.

In my humble opinion, Ben Bernanke did the right thing both times.  Given the cost of a collapse (which we're now seeing), it was worth gambling $30 billion on the chance that it might be averted.  That gamble didn't pan out, but getting a bad outcome doesn't mean you made a bad decision.  Bernanke played a bad hand well, but ultimately it just wasn't enough to take the pot.