Or will the U.S. Treasury bail out yet another bank? U.S. taxpayers have made some sizable investments in failing banks lately. Bear Stearns, Fannie Mae, and Freddie Mac are all still breathing thanks to my money and yours. That means we are now holding some of the same securities that were so bad they sent the economy into its current tailspin.
Elizabeth Warren worries the U.S. Treasury set a dangerous precedent when it bailed out Bear Stearns. And it may have, since Barclays, the last bidder for Lehman, walked away when the Treasury would not put taxpayers’ money on the line.
So now that Barclays is out of the picture, will the U.S. Treasury come up with a taxpayer-financed bailout, or will it let Lehman collapse? According to a Wall Street Journal source, “Lehman has hired law firm Weil, Gotshal & Manges LLP to prepare a potential bankruptcy filing.”
That’s a good sign, if you ask me. Unless a buyer steps in, Lehman should do what normal people and businesses must do when become mired in bad debt (“investments” if you are Lehman). The free market cannot function if there is a taxpayer-financed safety net in place.
As Treasury Sows, So Shall It Reap | Credit Slips
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The next president really has his work cut out for him. Let’s just hope the effect of the inevitable slowdown does not have a disastrous effect on the common man.