Letting Lehman go was a mistake. The event triggered a three-month market panic the likes of which no one living can remember, shutting down the interbank credit market and the commercial paper market and causing an instant run on money-market funds, and on the debt and stock prices of other large banks and investment banks. Full Story »
Posted by Derek Hawkins - via Google News (Business)
Not convinced. Most accounts I've read from economists indicate that financial crisis would have ensued with or without a nationalization of Lehman. Smith seems to oversimplify the issue, arguing that the credit freeze occurred because markets weren't prepared for the firm's collapse. But I don't see the strength of connection between Lehman's failure and the meltdown that followed. This was a lot bigger than just Lehman -- but Smiths seems incapable of seeing any level of systemic failure. His view isn't poorly argued, but it's quite narrow.
