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
This could be interesting, too:
Marc Chandler writes FX Becalmed Ahead of the Weekend and Next Week’s Big Events
Marc Chandler writes Continued Backing Up of US Rates Extend the Greenback’s Gains
Marc Chandler writes Soft US Headline CPI is Unlikely to Be Sufficient to Reanimate Expectations of another Large Fed Cut
Marc Chandler writes US Rates Extend Gains to Fray 4 percent
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.