Tuesday, April 20, 2010

Lehman Failure - Spencer Bachus & Fuld agree: it's the Fed's fault

Well, if proof were needed that Republicans have decided the financial crisis was the fault of the government and not of Wall Street, Bachus's questioning of the April 20, 2010 panel (with Fuld, former CEO of Lehman) during the hearing should put any such doubt away.

Fuld's testimony was, in effect, that neither he nor Lehman did anything wrong. The regulators said they did nothing wrong. So they didn't. And if the Fed had opened up its window to them, or backed Barclay to let it buy Lehman, or .... well, you get the idea.

So did Bachus question Fuld's denial of all responsibility? No he questioned a regulator from another government agency, not the Fed or the Sec, to elicit agreement that the Fed, in spite of protestations by Geithner, as former head of the New York Fed, and Bernanke, that it did have the authority to regulate Lehman, to stop its doing bad things and didn't do it.

I simply do not understand how the media let Republicans get away with their continuing defense of the very companies responsible for the financial meltdown.

Also clear from Republican declamations throughout this day's hearings is their belief, in spite of the meltdown following Lehman's collapse, that a "bailout" fund isn't necessary to assist in the orderly shutdown of failed institutions because the market should just let them fail. The market just let Lehman fail - and that caused the world's financial system to go into freefall.

The media, in their continued obeisance to Republican talking points, allow Republicans to characterize a fund to be funded by the financial institutions themselves as a government guarantee or taxpayer-funded bailout when its sole purpose is not to save an institution but to shut it down, fire its management, zero out its creditors, and use the money from the fund to help in the unwinding of positions.

But, of course, that would require the media to do their job, to do actual research. And that, of course, would be too much work. Indeed, since the SEC suit against Goldman Sachs was announced last week, our esteemed members of the press have wallowed, even gloried, in their inability to explain something very simple. Goldman sold a package of securities without telling the potential buyers a very critical piece of information: that the securities had been selected by a hedge fund which expected them to fail.

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