guardian.co.uk
28 days that shook the world
How the collapse of Lehman Brothers pushed capitalism to the brink
The Wall Street titan’s bankruptcy triggered a system-wide crisis of confidence in banks across the globe
Andrew Clark in New York
Friday 4 September 2009 12.14 BST
*** begin quote ***
Barclays picked up parts of Lehman from the bankruptcy courts, salvaging about 10,000 of the bank’s 25,000 jobs. But many still question the wisdom of the US government’s decision to stand by and allow a vast investment bank to go bust, given the intertwined nature of Lehman’s trading relationships around the globe. Larry McDonald, a former Lehman vice-president, says the Bush administration could easily have offered the guarantee needed to help Barclays buy Lehman outright: “They put Lehman Brothers to sleep. They executed her. They put a pillow over her face.”
Researching a recently published book on Lehman’s failure, “a colossal failure of common sense”, McDonald interviewed more than 45 Lehman executives. They insisted that they warned both Bush’s treasury secretary, Henry Paulson, and the then chairman of the New York Fed, Timothy Geithner, of the consequences of inaction: “They were begging Geithner and begging Paulson. They were saying to Geithner ‘you’re going to unleash the forces of evil on the global markets – you don’t understand what you’re doing!'”
That is not to say that Lehman can shirk blame for its predicament. With $18bn of core equity on its balance sheet, the bank had taken positions of an astonishing $780bn in mortgages, stocks, bonds, oil, gold, derivatives and other investments. It had leveraged its books by an astonishing factor of 44 and it had opted to take a particularly huge punt on America’s teetering home loans market.
*** end quote ***
This writer hits the 64k$ question, but doesn’t or can’t answer it.
Why does Lehman go under but everyone else gets rescued?
Perhaps the reason is Geithner and Paulson close relationship with Goldman?
Goldman makes out like a bandit in the chaos.
Not hard to leap to a conclusion there.
Bottom line: the taxpayer got screwed.
And, it began a series of actions to compromise “capitalism” and our liberty.
Misquoting Churchill: “the the American Empire and its Commonwealth last for a thousand years, men will still say, ‘This was their worst hour.'”
Will this single event, the 2008 financial crisis, and the Bush administration’s response to it, be the single event that marks the beginning of the end of the American Republic?
Like the The Reichstag Fire, that allowed Hitler to accelerate the banning of the Communist Party, is Bush’s TARP1 the “October surprise” event that allows Obama to come to power and dismantle the American experiment.
Sad to think. Sadder still to think an old injineer see something that the political elite choose to ignore.
# # # # #
Reinke Faces Life 