To: TimF who wrote (29577 ) 9/17/2008 8:38:11 PM From: DuckTapeSunroof Read Replies (1) | Respond to "Or SAYS it has no choice, and acts as if it didn't have one."With Lehman the feds decided --- small enough that the system can handle it. I agree with that decision. (Probably because counter-parties had already had the better part of a year to unwind their exposures to Lehman's paper - plenty of warning makes a big difference. Even so, today one money fund --- first retail one in history since the Great Depression to ever do so --- 'busted the buck', fell below one dollar valuation... because of Lehman paper it held in it's assets).With Bear Sterns --- I think if there had been a little more warning the feds could have let that one collapse (with no unreasonable out-sized risks to the world's financial systems either). But, caught on the horns of a dilemma they opted to not run the risk. That one I'll give the feds the 'benefit of the doubt' on... but I WISH there had been no bail-out for it. My opinion is that BS did not pose as great a systemic risk as was being sold.With Long Term Credit --- no way should an unregulated hedge fund ('registered investors' - multi-millionaires and foreign investors - were the only ones who legally could invest there) have been bailed out with taxpayer money. So mark me down as very much against that one. (And, IMO, the Fed has learned from that... and won't do that again....)But with AIG the Feds *really* had no other sane choice at this very late date. Talks with private investors had collapsed (they refused to invest without a government guarantee), so why not just 'cut out the middle-man' since the government was going to be stuck with the risks anyway... and give Uncle Sammy a chance at pocketing all the (possibly very large) potential PROFITS too that stand to come a year or two down the road when all the assets are liquidated?" Weapons of Mass Financial Destruction" indeed, they would have truly been risking a world-wide credit freeze and the collapse of international trade --- the same things that gave us last century's Great Depression.
