Capital infusion to the rescue...

There was talk earlier in the year that in the event of a stock market meltdown, the Fed would not hesitate to intervene by cutting rates aggressively just like it had done several times under the helm of Greenspan. It was also said that private equity firms had piled up a large amount of cash and were just waiting on the sidelines for the opportune moment to start buying again.
Things turned out differently, however, with a Fed under Bernanke hesitant to cut rates more energetically due to concern with regards to inflation. Private equity also stalled somewhat as the ensuing credit crunch took its toll on their ability to borrow cheaply. For a moment it seemed that there would be no way of averting a full blown sell off as the notion of an embedded put option seemed more of a fallacy than anything else. The situation changed, however, as large financial institutions began to disclose their large subprime related write offs. Suddenly, we saw cash infusion offers coming from Asia and the Middle East. Morgan Stanley, Citi, UBS and Merrill all received offers of cash in exchange for a stake. It seems that the embedded put option is very much alive.
This pattern also highlights an exchange that can only increase in importance in time. Emerging markets with their young population and large cash reserves are hungry for investment opportunities in contrast to developed nations with their aging populations and large deficits and an increasing willingness to sell their bonds and stocks to finance their retirement.