This is so dark and so insidious that I almost can’t bring myself to post about it but here goes.

Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed — after prodding by the federal government — to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million.

Bear Stearns had a stock-market value of about $3.5 billion as of Friday — and was worth $20 billion in January 2007. But the crisis of confidence that swept the firm and fueled a customer exodus in recent days left Bear Stearns with a horrible choice: sell the firm — at any price — to a big bank willing to assume its trading obligations or file for bankruptcy.

“At the end of the day, what Bear Stearns was looking at was either taking $2 a share or going bust,” said one person involved in the negotiations. “Those were the only options.”

What has happened here is that the taxpayer is taking the risk with the troubled mortgages as the only security

On Friday, the Fed announced a more direct rescue of Bear Stearns, by providing back-to-back financing through JPMorgan wherein the latter would hand over all eligible securities held by Bear Stearns to the Fed, and would pass along all Fed credit to the investment bank. Essentially, JPMorgan had the role of a middleman with the ultimate risk being held by the Fed as all financing to Bear Stearns was “without recourse” – a legal term that essentially means, once you make a loan against something, you are pretty much on your own, pal.

Please pay attention to this debacle because it is going to get much worse if it ever gets better.

UPDATE: Oil is almost $112 a barrel and the dollar is dropping to lowest rate against the yen since 1995