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>The US did the exact same thing with Lehmann - they found the bank that was more fucked than the rest, let them fail in a controlled manner, and it sent a sign
by rhino369 11y ago
>The US did the exact same thing with Lehmann - they found the bank that was more fucked than the rest, let them fail in a controlled manner, and it sent a signal to the market that "this is serious, equity will be wiped out, but it's not financial Armageddon". I expect China to send the same signals.
Which is a very good reason the Chinese probably shouldn't follow our lead. Letting Lehman fail was a huge disaster. It essentially seized the capital markets and sped up the collapse of a bunch of other banks. In my opinion, the solution is making the bailout so impalpable to the shareholders than it's really the last solution before bankruptcy. Or maybe even some special bank only bankruptcy that allow it to fully operate with government backing.
- scott_s 11y agoSee my cousin-comment in this thread: they did not let Lehman fail.
- Riod 11y agoYes they did. They were stopped by their ideology. The government could have easily nationalized it. Here's Paul Krugman talking about it right after Lehman went under: http://www.nytimes.com/2009/02/23/opinion/23krugman.html http://www.nytimes.com/2009/02/23/opinion/23krugman.html
- scott_s 11y agoYour narrative is directly contradicted by Bernanke himself. Read the NY Times article I linked to that references his book. He is clear on the matter.
- Riod 11y agoBernanke and treasury alone could not have done it. The government could have. What he left out was that they never considered nationalizing the banks. No narrative here; just pointing out what a Nobel prize winning economist laid out.