158 years and out.
After setting a precedent with Bear Stearns and the GSEs, the government finally decided that Lehman Brothers was not that big after all and decided to let it face the music that millions of Americans face every day: bankruptcy. It is not that I am overjoyed by the demise of one of the most venerable institutions our country has ever produced. After all, keeping the doors open for more than a century and a half is not easy. This company that was born in Alabama trading cotton played a significant role in the financial arena. Its loss will be felt by the 24,000 employees and beyond, but it will not be the end of the world.
Sending a message.
The feds finally realized that they cannot rescue every firm that gets in trouble. What is significant here is that the American taxpayer cannot afford the tab. Other firms that face problems are put on notice: they must try to clean their own houses without the deep pockets of the feds. The soup line just closed its doors, the gravy train made it last stop with Fannie and Freddie, at least, that is what we hope.
Self help.
One good outcome from this fiasco is the decision by major banks to create their own rescue fund estimated at 70 to 100 billion dollars to deal with future threats. Such a fund should have been established a long time ago, but as long as the feds were paying, there was no need for the banks to act. Now, things are different, Hopefully we won't have to be asked to put up more money to shore up another big wall street player.
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