Bear Stearns collapsed into the arms of JP Morgan Chase (and the Federal Reserve) last night, ending the stunningly fast fall of one of Wall Street’s legendary names. The credit crisis just got its biggest victim and its biggest story—so far.

The papers go big on their front pages today with the historic news that JP Morgan agreed to buy the eighty-year-old old investment bank for $2 a share, or $236 million. That’s 99 percent below its 2007 high of $171.51.

The Wall Street Journal doesn’t quite bust out the war font but splashes the story across four columns above the fold on page one, pairing it with the news that the Fed announced one of the biggest lending expansions since the Great Depression. The WSJ says Bear Stearns faced the “horrible” choice to sell now or fold up shop. It devotes its entire Money & Investing front to stories about the fallout.

The Financial Times splays the news across five columns on page one, saying the government wanted a deal done before markets opened in Asia late Sunday night U.S. time to prevent further runs on banks on Europe and the U.S. Asian stocks plunged more than 4 percent.

Bloomberg’s strong story

Bloomberg gets the tone just right in its story, giving readers a sense of the urgency and the peril that lies ahead:

“For Bear’s stock price to go to effectively zero, contrary to market expectations, even at the close on Friday, tells us that something is systemically very wrong and we’re at a very dangerous moment,” Goldman said.

Bloomberg says the Bear debacle implies that Wall Street’s shares are priced too high. It notes clients yanked $17 billion in two days in the panic and flat out states that the Fed’s major moves last week were a failed attempt to save Bear Stearns.

The New York Times calls it “shocking” and “a watershed” and notes that the sale price is less than one-third what the company was valued at when it went public in 1985:

The deal for Bear, done at the behest of the Fed and the Treasury Department, punctuates the stunning downfall of one of Wall Street’s biggest and most storied firms. Bear had weathered the vagaries of the markets for 85 years, surviving the Depression and a dozen recessions only to meet its end in the rapidly unfolding credit crisis now afflicting the American economy.

A throwback to a bygone era, Bear Stearns still operated as a cigar-chomping, suspender-wearing culture where taking risks was rewarded. It was a firm that was never considered truly white-shoe, an outsider that defied its mainstream rivals.

We’re in uncharted territory when the Fed gets involved in mergers and acquisitions: taxpayers will be financing (taking on all the downside risk) $30 billion of Bear Stearns’ junk assets so JP Morgan won’t get caught up in the downward spiral of falling asset prices and margin calls—essentially a run on the bank by Bear Stearns’ banks.

WSJ: Biggest-ever Fed advance

The WSJ says it thinks it’s “the largest Fed advance on record to a single company.” The Fed worries that without somebody guaranteeing Bear Stearns’ so-called counterparty risk—its commitments to other investors and institutions—the ongoing collapse of the financial system would accelerate

As far as government bailouts go, this one could be worse. We’re glad to see the government did not bailout Bear Stearns shareholders, who are already issuing “howls of protests,” the WSJ reports. The paper quotes one employee (Bear Stearns’ employees own one-third of the firm’s shares) who doesn’t get it:

“I’ve got to think we can get more in a liquidation, I’m not selling my shares, this price is dramatically less than the book value Alan Schwartz told us the company is worth,” said a midlevel Bear Stearns executive. “The building is worth $8 a share.”

The building may be worth $8 a share but the rest of the company is worth negative dollars a share, dude.

Shareholders have been essentially wiped out, as they should be, to prevent what economists call “moral hazard,” in this case the implication that the government will bail Wall Street out of its own mess because it’s “too big to fail.”

Not many on Wall Street‐or in the real world— are going to mourn the demise of Bear Stearns. It couldn’t have happened to a nicer company: the dithering chairman and ex-CEO Jimmy Cayne, who true-to-form was in Detroit playing bridge while it was dominoes that should have had his attention. The lying CEO Alan Schwartz who told investors all last week that everything was just fine. The in-it-for-itself ethos that offended even Wall Street. Its aggressive subprime-mortgage business and its past ties to businesses it knew were shady.

Low-rate raters

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.