Apparently the lack of confidence started at the top. I've seen reports that Bear-Stearns execs sold 27 million shares of B-S stock for $2 billion in mid-February.
If Bear-Stearns did not have a lack of capital or liquidity, why hasn't any other outfit offered more than $10 per share for it?
Indeed. The proof that the Fed did the right thing here is that of all the parties whining about how it was the wrong thing, not one is offering a higher bid to accompany the whine. Even while it was still at $2/share, there were no other bidders.