Monday, October 7, 2013

Fall of Lehman, What Might Have Been, New Normal

What Might Have Been, and the Fall of Lehman - "The decision not to rescue Lehman has been called a mistake and worse. Christine Lagarde, the French finance minister at the time, called it “horrendous.” No one suggested Lehman deserved to be saved. But the argument has been made that the crisis might have been less severe if it had been saved, because Lehman’s failure created remarkable uncertainty in the market as investors became confused about the role of the government and whether it was picking winners and losers. The government had bailed out Bear Stearns and then nationalized Fannie Mae and Freddie Mac but left Lehman for dead only to turn around and save A.I.G. Henry M. Paulson Jr., the Treasury secretary at the time, has suggested that the government didn’t have a choice because it lacked the proper tools to take over Lehman without a willing buyer. The British government pulled the plug on Barclays’s 11th-hour bid, a brilliant decision in retrospect." (read more at link above)

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