So the rumours were true - Bear Stearns gets a liquidity injection

What goes around, comes around.

Bear Stearns - the bank that started the credit crisis - ran out of cash. Lenders were pulling out, and the Fed had to step in to save the bank from collapse. It pushed JP Morgan as the front man for a bailout, offering a 28-day line of credit. The beleaguered bank has also hired Lazard to arrange a fire sale. One thing is for sure, Bear Stearns has been irreparably damaged and the future looks extremely bleak.

President and CEO - Alan Schwartz - trundled out the usual lame excuse for the lamentable state of the bank's finance. It was "rumours" that unfairly brought the bank down. "We have tried to confront and dispel these rumors and parse fact from fiction. Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated.''

So what are the facts? Well, we know a few. The bank has racked up $2.75 billion in write-downs since last year. Two Bear Stearns hedge funds that collapsed because each fund held billions of dollars of subprime backed mortgage securities backed by subprime mortgages. Here is another difficult fact. Llast year, the company' made a fourth- quarter loss of $854 million. What about their income stream? About one sixth of the firm's income derived from packaging and trading mortgage bonds, a market that has, for all practical purposed, collapsed since the summer.

There were plenty of facts behind this week's rumours, and these fact-based rumours led to a collapse in confidence in the bank. Now the bank belongs to the Fed.

What happens next? Well, something that will seem all too familiar to anyone who has followed the Northern Rock disaster. The emergency funding will quickly become long term funding. The deposit loss will continue, the bank will deteriorate, and inevitably, the Bear Stearns will slowly die.