"And, as Paul Krugman notes, in part McCain's nosedive is the result of a critical decision by Bush Treasury Secretary Hank Paulson earlier this month: to let Lehman Brothers fail.
Two weeks ago, on September 14th, Paulson let Lehman croak--and the credit markets went haywire. In short order, this led to the failure of AIG, WaMu, Wachovia, and the chaos of the emergency Wall Street Bailout."
"But I found myself thinking about that sign when reading this terrific WSJ article about how the fall of Lehman triggered global panic. One lesson of the article is that Paulson messed up very badly by letting Lehman fail."Here's from the WSJ:
"In hindsight, some critics say the systemic crisis that has emerged since the Lehman collapse could have been avoided if the government had stepped in. Before Lehman, federal officials had dealt with a series of financial brushfires in a way designed to keep troubled institutions such as Fannie Mae, Freddie Mac and Bear Stearns Cos. in business. Judging them as too big to fail, officials committed billions of taxpayer dollars to prop them up. Not so Lehman.
"I don't understand why they didn't understand that the markets would be completely spooked by this failure," says Richard Portes, professor of economics at London Business School and president of the Centre for Economic Policy Research. Rather than showing the government's resolve, he says, letting Lehman fail only exacerbated the central problem that has afflicted markets since the financial crisis began more than a year ago: Nobody knows which financial firms will be able to make good on their debts."
Doesn't this tell us that the credit markets going haywire and being spooked was because they were counting on government stepping in? I'm just asking.
So much for free markets, since the people playing the game don't even believe in it.
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Bob, Get this through your head. Our government is always going to do bailouts. Period. As a libertarian Democrat, all we can do is set in place a minimum of rules, and protect as much freedom and require as much personal liability as possible. It is in crises like these that government over-reaction often occurs. There's going to be regulation, the only question is how much and will it work. Of course, that's why I'm a Democrat. I want to help shape my party, which could, actually, get things done, and do things right."
The only way to avoid bailouts, which are horrendously costly and lead to excessive regulation, is to have a set of minimal regulations that precludes meltdowns such as the current one.
I understand his position, but it's not a real world solution.
I understand that many in my party will propose regulations that I don't agree with, and I need to be specific on where I, as a libertarian Democrat, disagree.
Right now, I not seeing a lot of specifics, but will talk about them when I do.