Fail, Baby, Fail

by Will Wilkinson on September 15, 2008

I pretty much agree with Nathan Oman:

… I have to confess that the fall of a major financial institution puts me in a down right jaunty mood.

Sure, the markets already have lost 3%, but what makes me happy is the news that Lehman Brothers threw itself at the knees of the Fed and the Treasury Department over the week end, and Berneke and Paulson looked on in stoney indifference. At last, it would seem, capitalism is going to do what capitalism is supposed to do: Punish those who make bad investment choices. Hopefully, we are in for a bit of short term pain while markets find their bottom and the dead and dying are taken out behind the barn to be shot. On the other hand, once the carnage is over those with money to loan, invest, and spend — and there are lots of them — will come out from hiding in their bunkers with the knowledge that we’ve unwound the risk, and a market that has learned something about the valuation of credit derivatives can move forward. To be sure, the landscape will be utterly changed, but that had to happen any way. Better this way than through a long, slow, expensive process of bailing out the super-rich. This is bad for the financial markets and the real economy may take a hit as well. It is good, however, I think for the long-term political health of capitalism.

I also agree with Tyler. Felix Salmon correctly scores the responses of the McCain and Obama campaigns to the Lehman collapse, though every time Salmon says “more” about regulation replace with “better.”

  • golfman_story
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  • Tod
    I sing the same song now to the big three. The so called "conservative" lobbyists, who regulated national demand, lose to the international real free-market. let joe 6pack choke their pockets and learn something about the lies of their beloved 4-more-years.

    Consequences pay with wisdom and Americans are so off message things will have to get worse before they can get better.

    I am very interested in seeing many new companies rush into the failing companies. Imagine how grand it will be if wiser foreign Co. like Toyota and Honda expand and buy up American economic and political leverage. finally some free market, then maybe our current infrastructure, unwilling to work at the future, will finally align.

    fail baby fail
  • Spot on. Bad decisions should be punished by failure so that the mismanaged assets can be acquired by more competent and responsible people.

    Now, if only the fed can summon the courage to let AIG (and an airline or two in the inevitable future) fail... that would be something.
  • Who's Berneke?
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