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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: stockfiend who wrote (85344)	9/17/2008 1:10:31 AM
From: stockfiend	2 Recommendations Read Replies (2) \| Respond to of 116555

AIG Rescue: Small Players to Pay Price online.wsj.com "It didn't take long for the government to flinch. Days after refusing to backstop a sale of Lehman Brothers Holdings, the Federal Reserve and the Treasury moved to rescue American International Group. This is a reminder that for all the talk of a free-market system where failure is the flip side of success, the government deems some institutions too big to fail. That arguably makes sense to protect global markets. But it could perversely lead to a two-tier financial system that rewards institutions that concentrate risk." ... "Yet the true cost could be longer-term market distortion borne by smaller, less- risky financial firms. These institutions will end up paying a bigger premium when they borrow from capital markets compared with those considered too big to fail. As the financial sector enters a new era, the incentive has just increased to build institutions that the government will have no choice but to rescue in times of stress."