To keep from creating a moral hazard, what will really work is to change the incentives that determine how bankers make investment decisions during the next up-cycle in the capital markets. The people who created the current damage will be long gone from the industry by the time that happens. So punishing those individuals will probably have very little effect on keeping future bankers from making the same kinds of decisions a decade or more from now.

Meanwhile, if the Fed allows Bear Stearns to collapse into bankruptcy, all its customers will find that their assets have been frozen. If those customers were a handful of middle class individuals, the effect on the economy would be negligible. However, Bear Stearns does business with the world's largest investment funds and corporations. If their money is frozen, the pace of global commerce grinds nearly to a halt.

This could lead to an immediate economic collapse which would force investment funds and corporations to cut costs -- throwing hundreds of thousands of people out of work, creating a slew of corporate and individual bankruptcies, reducing tax revenues, and otherwise mucking up the globe's economic works.

This ugly series of events may still be in our future. But our leaders have maneuvered us into a situation where we have a choice between bad: moral hazard -- and worse: credit collapse. Unfortunately, that leads us to choose bad for now.

I think the way to prevent moral hazard is to change bankers' incentives -- by tying up their bonuses in escrow to cover the costs of their future bad decisions. Such a change would be far more effective in curbing future moral hazard than satisfying the Times' desire for revenge on Bear Stearns.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.