And so talks continue in the shadow of Ground Zero over at the New York Federal Reserve Bank over the fate of beleaguered financial giant Lehman Brothers. Apparently, the taxpayer-backstopped interventions to deal with Bear Sterns and of Freddie Mac and Fannie Mae have wiped out the U.S. Treasury's reserves to do similar deals involving taxpayer money (solution: lower taxes for the rich... more), and so the leading proposals involve a break-up, and a disposal of Lehman's "bad" assets to a consortium of banks, who would themselves absorb the risk.
Needless to say, some of those banks are balking, and the chicken game goes on as to whether SecTreas Paulson will make the appropriate phone calls (presumably to Tokyo, Beijing and Seoul... and possibly Riyadh and Dubai) for the necessary infusion of capital to... get yet another taxpayer supported bailout here for Lehman, which will clearly not be the last such; if the line is drawn now, that "the market" must bail itself out from here on in, then we will start to see just how deep the current financial crisis is.
Thankfully, SecTreas Henry Paulson and Fed Chairman Ben Bernanke have an attribute sorely lacking in the rest of the Bush Administration: competence. It's not hard to explain why, of course: in the area of money, stability in the system is "in sync" with the interests of the Bush Administration's "client," big business, in a way that, oh, environmental or workplace safety or other government involvement is not. Still, they can only work with what they have, and a sufficient hash has been made of government finance (which has spilled over to the economy writ large), that one wonders if they'll be able to prevent a broader financial meltdown.
Well, time will tell. We'd probably be looking at the stock market circuit breakers coming into effect pretty early tomorrow (from dramatic losses) should there be no resolution of the Lehman situation by tomorrow morning. As to the broader implications? Who knows. The economy is softening, unemployment and inflation are up, the sub-prime and mortgage-backed crises continue to roll on, Lehman's problems have spilled over to insurance giant AIG and to investment giant Merrill Lynch, and as it was clearly the party atmosphere of the Grand Old Party for the last nearly 8 years that has helped bring us to this moment.
Of course, Barack Obama is Black.
Update: The events of the day have led to this: Lehman Bros. will probably file for bankruptcy protection, and be ultimately liquidated, and Merrill Lynch will likely go the way of Bear Sterns and Lehman Bros., i.e., disappear, probably by being absorbed into Bank of America. Pressure mounts on insurance giants AIG, and Washington Mutual as well... and stock futures are already well down.
I understand that former Fed chairman Alan Greenspan was on ABC's "This Week," saying this is the worst crisis he's seen in his career. He should know, of course: he largely caused the current crisis, with his imprimatur on the Bush tax cuts coupled with his irresponsible money-management under both Clinton and Dubya alike, always stepping on the accelerator, never on the brakes. While in the annals of our time, Bush, Cheney at al. will get their just place as super-villains... but Greenspan surely deserves a special place there as well. Just saying.
Fortunately, Bernanke is in and Greenspan is out, but we got trouble right here in New York City and that starts with t and that rhymes with e, which stands for economic collapse. I understand that none of this is as important as Sarah Palin, of course, but... just saying.