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Sentences to scare you
The government is looking for an agreement that would not involve public money.
That's about Lehman Brothers.
Posted by Tyler Cowen on September 11, 2008 at 10:12 PM in Current Affairs | Permalink
Comments
I wish them luck, but...
Doesn't some reasonable moral hazard imply that they have to let somebody fail? And if not Lehman, then who?
Posted by: ZBicyclist at Sep 11, 2008 10:32:48 PM
I watched Larry Summers on Charlie Rose last night.
Summers advocated for some sort of mechanism that would allow large corporations to fail, but to do so without causing the economy to melt down.
I have no idea how such a mechanism would could be designed and implemented. But that's certainly something that smart minds should be thinking about.
Posted by: thehova at Sep 11, 2008 10:54:23 PM
How about sound money and free banking with no note issue restrictions or branching regulations? Just a thought.
Posted by: Caleb Rackliffe at Sep 11, 2008 11:25:51 PM
maybe China should buy Lehman.
Posted by: pants at Sep 11, 2008 11:36:16 PM
Interesting concept... Public money..
Posted by: pro privo at Sep 11, 2008 11:45:16 PM
Why should this sentence scare me?
Posted by: Josh at Sep 12, 2008 12:59:45 AM
Why is this sentence scary?
Because "heads we win, tails the taxpayers loose" crony capitalism was/is always based on public bailouts even though "free market" rhetoric was strategically employed by the cheerleaders every step of the way.
Without taxpayer money, Lehman's counterparties will take sizable losses. In the future they (and the rest of Wall Street) will impose rigid controls on risk and leverage.
That means that the Wall Street money machine substantially closes up shop and clearly that's not an outcome Tyler can live with.
Might be (rather) good for the American people though.
A real economy? Based on production and sale of actual goods and services rather than debt spirals and speculation?
Unthinkable, at least in some quarters.
Posted by: Crony Capitalism, American Style at Sep 12, 2008 2:01:29 AM
Maybe we could work out a deal where we give Lehman to China in exchange for letting the GSEs fail.
Posted by: David Wright at Sep 12, 2008 3:06:31 AM
And why exactly would China want a free Lehman?
Posted by: CK at Sep 12, 2008 9:42:29 AM
Maybe we could work out a deal where we give Lehman to China in exchange for letting the GSEs fail.
China sez: "Dammit, I put billions in what I thought were risk-free assets and all I got was this crap investment bank. You couldn't even give me Goldman? Bring me Hank Paulson on a stick and we're even"
Posted by: pants at Sep 12, 2008 9:56:20 AM
pants: :-)
Posted by: David Wright at Sep 12, 2008 10:29:08 AM
It seems like most folks are missing the silver lining here. Before the recent crash, the Chinese appeared to take American financial capitalism seriously and were willing to trade access to the Chinese market (for American investment bankers) in exchange for political support in Washington.
That mean Goldman, etc. lobbying for "free" trade, the rigged RMB, massive trade deficits, outsourcing, etc.
Now having seen how well American crony capitalism works, and how quickly sovereign wealth funds get burned on Wall Street, they are backing off.
This is a double dose of good knews. China won't poison itself with America'a failed financial system and the IBs will have less incentive to betray our nation's interests for the Chinese market.
Posted by: Crony Capitalism American Style at Sep 12, 2008 11:54:08 AM
It seems like most folks are missing the silver lining here. Before the recent crash, the Chinese appeared to take American financial capitalism seriously and were willing to trade access to the Chinese market (for American investment bankers) in exchange for political support in Washington.
That mean Goldman, etc. lobbying for "free" trade, the rigged RMB, massive trade deficits, outsourcing, etc.
Now having seen how well American crony capitalism works, and how quickly sovereign wealth funds get burned on Wall Street, they are backing off.
This is a double dose of good knews. China won't poison itself with America'a failed financial system and the IBs will have less incentive to betray our nation's interests for the Chinese market.
Posted by: Crony Capitalism American Style at Sep 12, 2008 11:56:09 AM
You couldn't even give me Goldman? Bring me Hank Paulson on a stick and we're even"
DEAL!
Posted by: JordanT at Sep 12, 2008 4:30:19 PM
1) let lehman fail! Failure is good, everybody should fail some of time but not all of the time (Just ask the CEO he is probably golfing).
2) I am sick of all this financial interdepence talk leading to the economy spiriling out of control. We are no more intertwined than the florentine bankers were. Big deal we sit behind computers all day emailing and reading useless garbage. I dont feel smarter...do you?
3) I suppose the shorts were right, David Einhorn in particular. There was ample warning regarding the direction Lehman was heading. If regulators continue to allow Corporations to mislead the public (*Investors in Lehman stock I suppose should have been more attentive as well) with there shady accounting the problem is only going to get worse. Read David's speech he does an analysis of Lehmans accounting.
Posted by: bragadoccio at Sep 12, 2008 4:39:06 PM
What's the difference between the LHC and an investment bank?
One could destroy the world. The other is a physics experiment.
(posted by D.F. Manno in the newsgroup alt.fan.cecil-adams)
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