More news that surprises absolutely no one, from the Financial Crisis Inquiry Commission’s 533-page opus that was issued on Thursday. Turns out that back in 2008, Lehman Brothers had caught a bad case of the leprosy. There was nothing there anyone wanted, not without the government backing it up like a video hoe:
The other side of the story is that no one would touch Lehman, with the market in free fall, without some assistance from the government.
Perhaps Merrill Lynch’s CEO at the time of the crisis, John Thain, said it best to the panel.
“There was a criticism of bailing out Wall Street. It was a combination of political unwillingness to bail out Wall Street and a belief that there needed to be a reinforcement of moral hazard. There was never a discussion about the legal ability of the Fed to do this.”
He noted that “there was never discussion, to the best of my recollection, that they couldn’t [bail out Lehman]. It was only that they wouldn’t.”
Much attention has been paid to the inconsistency of the failouts, with many firms saved while Lehman was allowed to crash and burn. That Lehman had nothing anyone wanted other than that stock room of company-logo tchochkes might at least partially explain it.
Jamie Dimon is quoted as asking, at the time, “What is the definition of solvency?”
Well, it’s kind of like the definition of obscenity. You know it when you see it, and when someone is leveraged 40 to 1 and says they have $60 bil in real estate holdings, Lehman looked as solvent as a middle-aged sister-wife in Utah looks obscene. So, everyone shunned Lehman Brothers like the other unicorns shunned Charlie, the non-believer. SHUNNNNNN:
At any rate, I think the conclusion of the article is “we should have bailed out either all of them, or none of them,” because, as Charlie the unicorn would say, letting one firm fail while the rest are bailed out is the equivalent of having the financial system wake up in a bathtub full of ice in a hotel in Vegas somewhere, wondering what in the hell happened to its kidneys. Or, something along those lines.