A former top Federal Reserve official has said that the Fed's bailout of Bear Stearns Cos (BSC.N: Quote, Profile, Research) will come to be viewed as the "worst policy mistake in a generation," the Wall Street Journal reported on Tuesday.

Vincent Reinhart, who used to be the Fed's director of monetary affairs and the secretary of its policy making panel, said the event would be compared to "the great contraction" of the 1930s and "the great inflation" of the 1970s, the Journal reported.

The Fed, which is working to stabilize the markets, had offered $30 billion of financing for Bear's assets to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), which offered to buy the ailing bank, and helped it sidestep a bankruptcy filing.

But the rescue "eliminated forever the possibility the Fed could serve as an honest broker," Reinhart told the Journal, pointing to other options like looking for other suitors and removing some assets from Bear's portfolio, which he said were possible but not pursued by the Federal Reserve.

The Federal Reserve was not immediately available to comment.