Lehman’s wrong lesson
It is nine months since the collapse of Lehman Brothers and the financial crisis is—so we are told—pretty much over. The banks are unfreezing and things are returning to normal. A host of American banks are queuing to repay the money they got from the US government last autumn under the Tarp scheme. In Britain, Lloyds TSB has been doing the same.
“Here’s your money,” is the near universal refrain from the bankers to the politicians. “We want our laissez-faire economy back. If you won’t give it to us, we won’t lend and there won’t be any recovery. And if that’s the case, it will be your fault.”
People have pondered long and hard since last September whether the US government was right to allow Lehman Brothers to collapse. Some believe that it was a reckless act that imperilled the global financial system. Others think it was a necessary shock that gave us at least a chance of changing behaviour in the financial system and checking the bubble mania of recent years.
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