U.S. Congress delays Oct. 3, 2008 bailout a second time, as successful brinksmanship?

lehman-brothers-sign-007.jpg

https://www.google.com/amp/s/amp.theguardian.com/commentisfree/cifamerica/2011/dec/12/lehman-brothers-bankrupt

https://www.google.com/amp/s/wgno.c...the-financial-crisis-spun-out-of-control/amp/

‘ . . . So Lehman Brothers was allowed to fail. At 1:45 a.m. on Monday, September 15, 2008, Lehman Brothers filed for Chapter 11 bankruptcy protection. . . ’
So, a very specific time the financial crisis went into high gear.
 
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Fed’s $85 Billion Loan Rescues Insurer

New York Times, Edmund Andrews, Michael de la Merced, Mary Williams Walsh, Sept. 16, 2008

https://www.nytimes.com/2008/09/17/business/17insure.html

' . . . With time running out after A.I.G. failed to get a bank loan to avoid bankruptcy, Treasury Secretary Henry M. Paulson Jr. and the Fed chairman, Ben S. Bernanke, convened a meeting with House and Senate leaders on Capitol Hill about 6:30 p.m. Tuesday [Sept. 16, 2008] to explain the rescue plan. . . '
I think it was highly helpful to keep the whole thing from cascading.

Some might disagree.
 
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https://www.princeton.edu/ceps/workingpapers/243blinder.pdf

Lesson # 8: Illiquidity closely resembles insolvency.

' . . . Bear Stearns was bleeding cash in March 2008, owing largely to rumors (based on facts!) of large losses in its mortgage businesses. In the fateful days before its shotgun marriage to J.P. Morgan Chase, Bear was about to run out of cash. Had that happened, the firm was dead, just as if it had gone bankrupt. But the Fed prevented that from happening—first with a loan, and then by arranging for J.P. Morgan to absorb Bear (at a fire-sale price, by the way). To make the sale work, the Fed had to take almost $30 billion worth of dodgy assets onto its books . . . '
Bear Stearns was saved, at risk and expense to the U.S. taxpayer, whereas Lehman Brothers (Sept. ‘08) was not.

Economist Alan Blinder asks, was Lehman really in that much worse shape, especially given likely consequences to overall economy? And he answers, no, it was not.
 
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