There is a lot of media coverage of the Lehman anniversary at the moment (plus some interesting TV and radio shows).
Here are a couple of interesting articles that caught my eye:
This week’s Economics Focus in The Economist
and this Bloomberg article on the ‘front line’ of the run – the dollar money market.
4 replies on “The Lehman Anniversary”
Markets 12 months after Lehman collapse
Two very good articles.
Re the Economist. Would saving Lehman have prevented the crisis? There are obviously two camps of thought on that. Personally, I think it would have just pushed the eventual crisis further down the line.
I watched BBC 2s programme on the collapse tonight. Allied to dozens of reports I have subsequently read since the collapse, I could not help get the feeling that Paulson and Geithner (both ex Goldman Sachs) thought any fallout could be contained.
It was interesting to hear on tonight’s programme, that from the US perspective, it was the British Government that blocked the Barclay rescue deal.
It is obvious they did not like the idea, but as Barclays own negotiator said, “it was a bad deal, so we walked away. ”
Did bad blood between Goldman Sachs and Lehman play any part in the affair?
Who knows…There does appear to have been personal hatred.
Lawrence McDonald & Patrick Robinson’s book “A Colossal Failure of Common Sense: The Inside Story of The Collapse Of Lehman Brothers, sheds some light on this.
What cannot be disputed is that in the weeks before and after the death of Lehman, Paulson had saved AIG [American International Group], Washington Mutual, Merrill Lynch, Fannie Mae, Freddie Mac, and Bear Stearns.
Goldman certainly stood to gain.
It would be interesting to hear the views of other bloggers.
Returning to the article in the economist. They point out that Government intervention led other firms, including Lehman, to believe that when push came to shove, they too would be spared. Had Lehman been rescued the criticism would have intensified, as would firms’ expectations of future rescues.
With Nama, are we creating our own too big to fail monsters?
In Larry McDonald and Patrick Robinson’s book “A Collossal Failure of Common Sense” the,” incredible story of the Lehman collapse” the key words are “failure of common sense.” With NAMA , if it goes through, the same sentiment will pertain. While every single commentator and analyst has concentrated on the methods of valuing loans, the haircuts, etc. Few, if any economists have pointed out that NAMA will swallow up every single cent of government borrowing available to this country and what that means for Ireland going forward not to mention the impending steep rise in interest payments to near 20% by 2013.
Therefore, we have no stimulus available full stop. Underlying NAMA is the assumption that NAMA itself is a stimulus package for the Irish economy and that the banks will start lending again. NAMA is the opposite to a stimulus package. Failure to point that out, shows a lack of common sense by almost all economists in the analysis of NAMA. They have been too busy defending the maths of their “haircuts” or defending their arguments from attacks by peers.
Our government are being allowed to substitute “a gamble” of 63 billion instead of a real stimulus for the economy and at the risk of boring everybody that “gamble” makes certain that there will be no money available to inject into the real economy as stimulus as opposed to pumping it into derelict sites and half finished building projects and sitting on it for years to come. The economists on this site have allowed themselves to be led or failed to see a very large warning sign “NAMA cul-de-sac”.
Put simply, this failure to put a stimulus package together means at best a stagnated economy mired down for years to come. But more likely, is a goodbye to even more jobs/longer dole queues scenario, more businesses failures, rising mortgage defaults especially in the buy to let area, tax receipts stagnating and of course even falling further. Simultaneously, we have a government desperately trying to squeeze more tax from the ailing economy only to succeed in killing off consumer spending leading to yet more job losses. The country too is being led into a cul-de-sac.
Where, even nama-free, would we get the money, what would be the net stim effect (Itir a debate on the multiplier a while back), and so on.