by In a paper, Larry Ball argues that inadequate collateral and lack of legal authority were not the reasons that the Fed let Lehman fail. … … the primary decision maker was Treasury Secretary Henry Paulson–even though he had no legal authority over the Fed’s lending decisions. … evidence supports the common theory that Paulson was influenced by the strong political opposition to financial rescues. … Another factor is that both Paulson and Fed officials, although worried about the effects of a Lehman failure, did not fully anticipate the damage that it would cause. James Stewart comments in the New York Times.
Topics:
Dirk Niepelt considers the following as important: Bailout, Federal Reserve, Lehman Brothers, Moral Hazard, Notes, Solvency, Treasury
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In a paper, Larry Ball argues that
inadequate collateral and lack of legal authority were not the reasons that the Fed let Lehman fail. …
… the primary decision maker was Treasury Secretary Henry Paulson–even though he had no legal authority over the Fed’s lending decisions. … evidence supports the common theory that Paulson was influenced by the strong political opposition to financial rescues. … Another factor is that both Paulson and Fed officials, although worried about the effects of a Lehman failure, did not fully anticipate the damage that it would cause.
James Stewart comments in the New York Times.