Off balance-sheet credit default swaps are at the center of Bear Stearns' collapse. And, yes, in practical terms, the company collapsed. I don't think it was "bailed out." The intent was to bail out, or preclude, something much larger: a loss of confidence in similar derivative instruments at other firms, like Lehman Brothers, which could have sparked parties to these swaps to pull out. That would have caused problems for all parties involved, including a massive group of borrowers. Am I making sense yet?

If Wall Street complains about the media and the public's inaccurate brushstrokes ("U.S. government bails out wealthy investment bankers!"), too bad. Many of these firms don't even know how much they're worth or how much risk they've swallowed, so how are observers supposed to understand and describe their problems with detailed accuracy?

The best description of the debacle I've seen was from Former Treasury Secretary Paul O'Neill in this interview [2]. In response to a question on how the subprime mortgage crisis has triggered a global financial crisis, O'Neill explained, "If you have 10 bottles of water, and one bottle had poison in it, and you didn't know which one, you probably wouldn't drink out of any of the 10 bottles; that's basically what we've got there."

Making sense of this mess requires reading, thinking, and synthesizing. Thank goodness for a complex technology's user friendly way of delivering content that folks like me can digest. You can, too. Here are some links that appeared in the past several days, organized under broad-brushstroke headers:

The blueprint is bad:

San Jose Mercury News: Paulson's plan only shuffles regulatory duties [3]

Slate: Why Fed Reform Won't Work [4]

The Wall Street Journal (reporting on those who say it's bad): Lobbyists, Small Banks Attack Plan For Markets [5]

It's good, or at least appears to be OK, we think (er, at this point ...):

Dallas Morning News Blog: Paulson's Fed plan [6]

An overview of pros and cons:

Financial Times: The Paulson blueprint is more about form than content [7]

Fortune: Fed up with the Fed [8]

Decide for yourself:

U.S. Treasury Department Office of Public Affairs: Fact Sheet: Treasury Releases Blueprint for a Stronger Regulatory Structure [9]