Danny Schechter - ColdType

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Alan Blinder, a former Federal Reserve Bank Vice Chairman
was also furious, calling it “a colossal error.” He added,
“Coming just six months after Bear’s rescue, the Lehman decision
tossed the presumed rulebook out the window. If Bear
[Stearns] was too big to fail, how could Lehman, at twice its
size, not be? If Bear was too entangled to fail, why was Lehman
not? After Lehman went over the cliff, no financial institution
seemed safe. So lending froze, and the economy sank
like a stone. “
This quote appears in the book, In Fed We Trust, by David
Wessel, a Wall Street Journal editor, on Chairman Ben Bernanke’s
role as the crisis manager in chief. His findings provoked
New York Times book reviewer Michiko Kakutani to wonder:
Although an enormous amount of recent attention has been
understandably focused on why the government let Lehman
Brothers go under, an equal amount of attention might
understandably be focused on why Lehman – and other firms
like Bear Stearns and AIG – were ever allowed to engage in
the sort of reckless, illogical, self-destructive gambling that
turned them from Wall Street behemoths into combustible
houses of cards in the first place?
And one might also ask, why Bernanke, who knew how the
devastation caused by fraudulent subprime mortgage lending
was tearing up so many lives, did not stop it when he could
have? (He issued tough regulations, but much later, well after
the fact.) Does that not make him, the Fed and the government
complicit in this crime?
The book also reveals that neither Bernanke or Tim Geithner
had any idea of the consequences of Lehman’s collapse.
They expected to be sending one message about moral hazard,
but sent another, suggesting that big banks would be
bailed out. Today, after billions were lost, their naivete seems
shocking:
None of the senior government policy makers anticipated