Why Should Lehman Brothers Be “Saved?”

September 13, 2008 at 8:48 pm | Posted in American politics | 7 Comments

It looks like Lehman Brothers is finally hearing the fat lady sing. There is all sorts of talk over this weekend about ways to save this institution, this major bank, the fourth largest on Wall Street. Lehman Brothers got a little too greedy and got mixed up in the Great Housing Bubble. They hold a whole bunch of worthless money and cannot raise enough capital to stay above the pile. Because it is so big, its collapse will greatly influence the rest of Wall Street. Merrill Lynch is close to collapsing as is AIG. Inevitably they will collapse too if Lehman Brothers falls. They don’t have enough to support themselves anymore. So the question is simply this, should we let Lehman Brothers fall?

To begin, let’s explain the arrogance of an institution like Lehman Brothers. For example:

Argentine President Cristina Fernandez de Kirchner told Lehman Brothers Holdings Inc. to worry about its own finances, three weeks after the firm said the South American country could default within two years.

“Today the news in the papers, in all the papers, is the collapse of another bank far away in the United States — that bank that predicted the collapse of Argentina,” Fernandez, 55, said during a speech last night. “They should spend more time looking at their own accounts rather than looking at other countries.”

Ouch!

Lehman Brothers and the rest of the banks of Wall Street ran roughshod over much of the world, particularly in Argentina back in the late 90s when Argentina had all sorts of financial problems (eerily similar to what we are facing now). See, the folks leading Lehman Brothers and Goldman Sachs, and Merrill Lynch, and Bear Stearns (before it fell), and on and on, see, they believe in Objectivism, Ayn Rand’s stupid, selfish philosophy. Objectivism is sort of a law of the jungle. Only the strong survive. The folks who lead these large financial institutions believe that greed is good, that one shouldn’t rely on others to survive and to succeed. But see, they only believe in this principle theoretically. They don’t believe it in practice. Do you know how often such institutions “run home to mamma” (i.e. Joe Taxpayer) when serious problems arise? Note right now that the banks that could buy Lehman Brothers (even in a fire sale) don’t want to commit to buying the plagued company unless there is Joe Taxpayer backing! These same institutions that have been fighting AGAINST the government aiding Joe Taxpayer when Joe Taxpayer is in trouble run to Joe Taxpayer when they are in trouble.

Frankly, I say let them fall. Let banks learn this lesson. No bank is too big not to allow to fail. Let them fail. Let there be consequences for bad actions! Banks like Lehman Brothers got greedy and sloppy. They approved the purchase of mortgage securities from dumb companies (like Countrywide Financial) when they should have known that most of those mortgages were not really that secure. See Countrywide (bought at a great discount by Bank of America—with Joe Taxpayer security) and Thornburg Mortgage (bankrupt) and all the others began giving out all sorts of mortgages to people who could not otherwise afford those mortgages. There simply wasn’t enough money in the system to handle how much money was promised by these mortgage financial companies. There seems to be going around this virus that takes away reason from many. Many Americans (including John McCain) think we have an infinite supply of warriors to wage war when we really don’t. Many bankers apparently forgot that there really is only so much actual cash within our economic system. This cash just doesn’t trickle down that quickly to those who were given massive mortgages with poor credit. They just simply didn’t have enough and, because of the rules of the system, they had to foreclose on their properties, causing the bank to have to write off that mortgage and the money tied to it. There just isn’t enough money in the system for what was promised. And now the value of all homes across the nation has gone down, forcing more writeoffs and more foreclosures and more banks going under.

Banks like Lehman Brothers knew better. You don’t get to be an executive at Lehman Brothers without knowing a hell of a lot about the world of finance. And you would know very well that there is only so much money in the system. You would know very well that low income wager earners simply cannot maintain a certain level of payment. Why would you purchase mortgage security of such high risk loans and then expect a different result?

They don’t deserve to be saved. Based on libertarian principles that most bankers believe in, let the chips fall where they may, and let banks like Lehman Brothers fail.

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7 Comments »

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  1. whatever happened to the Republican mantra “let the market forces decide …” ?

    these BAILOUTS have now become Standard Operating Procedure; businesses do NOT have to concern themselves with risky practices, because there’s a bailout waiting at the end of every rainbow.

    prundent financial practices? have you lost your mind? remember, GREED IS GOOD.

  2. well said Leonard.

  3. You know, this isn’t all that different from watching videos of the collapse of the WTC towers. There was a really interesting show on one of the cable channels last week, leading up to the anniversary of 9/11 about what caused the towers to fall, and how one weakness contributed to another weakness, and pretty soon, the entire structure came crashing down.

    I can’t help but get the feeling that there are going to be some really hard times ahead, and it’s not going to be all that long now.

  4. Greedy ivy league frat boys. They get paid millions no matter what their results are. Hear that Merrill Lynch? Do WHATEVER you please. We the people will provide your golden parachute.

    Everyone gets bailed out but no one makes it a condition that the top 10 executive idiots must also go. We bailed out airlines, which never made a profit before or since, and rewarded the top idiots by letting them stay. There’s always this odd reverence and deference given to guys who can be outperformed by any high school economics student. I don’t get it. Let them implode into reality instead of financing maintaining this Disney World Fund paid for by us.

  5. Oops, nevermind. They just announced that Merrill Lynch agreed to be bought by another bank. Ok, then we’ll just bail out whoever bought them. How did we get this culture of incompetent bankers? It’s embarassing. While our guys are out buying their 5th vacation home, the Japanese are buying buildings.

  6. Why they left Lehman Brothers collapse while they helped so many companies to stay alive? L.B. is one of the oldest financial organisations…

  7. Katerina,

    Sadly they let Lehman Brothers fall because it has been forecasted that Lehman Brothers would inevitably fall for the past several months. There is no shock in them actually falling. Everyone was already prepared.

    It is a sad state we are in today, and future generations will be looking back at this time in history the way we look back at the days before the Great Depression.


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