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On Friday the story of the day was Bear Stearns and their liquidity issues. The Federal Reserve, along with JP Morgan Chase came to the rescue with emergency funding for the company. The Federal Reserve has taken an unprecedented step in bearing the risk on the loan to Bear Stearns and providing it access to cash to stay afloat. This marks the first time the Federal Reserve has made such a move since the Great Depression.

Interestingly enough, on Monday Bear Stearns CEO Alan Schwartz proclaimed the company in a note that Bear and its "balance sheet, liquidity, and capital remain strong." Wednesday again Schwartz was on CNBC deflecting rumors that the company was having severe liquidity problems and assuring everyone they would be just fine. Fast forward to Friday morning and Bear Stearns says in a 10:30 am conference call that "in the past day" their liquidity position had been hurt severely. It is amazing to me that this liquidity which was so strong on Monday could have come to needing a bailout by the Feds on Friday morning.

The Feds certainly came to the rescue because of the overall effect that this whole situation could have on the economy, not just Bear Stearns. Now the question becomes, is this problem company specific to Bear Stearns or is this just the beginning?

I do not believe that Bear Stearns will end up being the only company looking for this type of help from the Federal Government. There are simply too many corporations out there right now that are hurting so badly from the credit crunch and the awful situation in the housing market. Lending corporations have to have balance sheets that are absolutely in a lot of pain, and other investment banks could also be in somewhat similar situations. I believe Bear is probably the one in the worst shape in this space, and a company like Goldman Sachs is probably the safest, but other banks could need some help if the current situation continues in coming months.

I believe at this point it is not a question of whether the liquidity issues will arise elsewhere, but a question of just how widespread will it be. Will it be a couple other major corporations or will be it be dozens of corporations? One has to hope, for the sake of the American economy, that it will be the former.