Ben Bernanke Got Punk'd

The Federal Reserve's been had. It just doesn't know it yet.

Yesterday's fivefold increase in JPMorgan Chase's (NYSE: JPM  ) bidding price for the Al Capone vault that Bear Stearns (NYSE: BSC  ) has become is as shocking as the original $2 a share cold shower that greeted the market a week ago. But this time, it's a slap in the face of the Fed-fueled buyout that Ben Bernanke helped orchestrate between JPMorgan and Bear Stearns by gnawing away at the risk.

So if you notice that one of Bernanke's cheeks is a richer red than the other, it's not because he's half-blushing, or caught a spring training baseball game where the sun only sizzled half of his face. He got slapped. He got Punk'd. If he missed the hidden cameras and the B-grade actors setting up the prank's volley, surely he'll figure that much out once Ashton Kutcher pops in for the spike.

I was one of those who sheepishly praised the Fed for taking action to keep Bear Stearns from collapsing. I was duped, too. I didn't realize that the Fed was putting up a dowry for a wedding that it apparently wasn't even invited to attend.

Sure, the sweetened buyout finds JPMorgan also willing to take on a little more of the risk. Instead of agreeing to finance $30 billion in iffy Bear Stearns investments, the Fed has put JPMorgan on the hook for the first $1 billion of that total. What a sacrifice for JPMorgan!

Still, the market seems to think that the party is just getting started, the way the shares catapulted past the $10 mark in yesterday's trading. Is this a prelude to an even richer bid? If so, this really has to stop. The Fed entered the fray to save Bear Stearns from collapsing, not to enrich shareholders on the public's dime.

The only way to save a slapped face is for the Fed to open up the process. If any company is willing to pay at least $0.01 a share for Bear Stearns without the need to put the Fed on the hook, there's no reason for financial intervention.

It sets a bad precedent if the Fed is picking sides when it doesn't need to. I thought that investors paying more than $2 a share for Bear Stearns' stock last week would get burned. They weren't privy to what the Fed, JPMorgan, and Bear Stearns were looking at when they came together for the original bailout. Now that JPMorgan has validated the market's reaction with a higher offer, Bernanke looks like a bigger sucker than a 140-pound lollipop.

Does the Fed now have a fiscal responsibility to play Cupid? If XM (NYSE: XM  ) and Sirius (Nasdaq: SIRI  ) have financial snags in completing their merger, will Bernanke come to the rescue? Where was Helicopter Ben when Restoration Hardware (Nasdaq: RSTO  ) had to settle for less in its own buyout bid?

Red cheeks fade. Prank victims live to laugh another day. Precedents, on the other hand, are forever.

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