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The problem was a political one. When Lehman Brothers failed, I believe it was something like 60,000 people lost their jobs over the actions of 300 people. Ther
by redrobot5050 16y ago
The problem was a political one. When Lehman Brothers failed, I believe it was something like 60,000 people lost their jobs over the actions of 300 people. There was political pressure on a weak administration (Bush is already consigned to the bottom 5 presidents in American history) not to make the shitstorm it was handing over to the Obama administration any bigger. People losing their jobs in a recession == bigger shitstorm.
In other words, the process you described works great, but "creative destruction of the free market" is not a great talking point amongst the masses.
- hga 16y agoGarbage. The failure of Lehman Brothers caused the Reserve Primary Fund, which had been making a big deal about how they, the inventor of the money market mutual fund or the like, were being conservative in their investments, to "break the buck" (http://en.wikipedia.org/wiki/Reserve_Primary_Fund http://en.wikipedia.org/wiki/Reserve_Primary_Fund). All that plus the AIG mess etc. caused perceptions of counterparty risk to soar. There was an insane run on money market funds and drastic action had to be taken to prevent the banking system from seizing up. A lot more than 60,000 jobs were at stake; perhaps less than 600 million, but certainly 9 figures worldwide and 8 in the US.
- redrobot5050 16y agoDo you have a better source than wiki? I mean, this was the party line on justifying the bank bail outs, but again, its counter to the World Bank Handbook on resolving bank insolvency through government buying/auctioning the bank components.