Benny exits total denial mode, acknolwledges that while the feds did not bail out Bear Stearns per se, the Fed did bail out the economy as a whole:

“Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain,” Bernanke said. “Moreover, the adverse impact of a default would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability.”