Vincent Reinhart gets the Lehman collapse precisely right at The American (a Journal of the American Enterprise Institute).
Regular readers know I often disagree with the ideologically pre-determiend conclusions from AEI, but in this case, Reinhart is dead on. “We have inverted a morality tale about individual recklessness” into something entirely different “about collective culpability through inaction.”
This month marks the second anniversary of a colossal failure that has shaped financial officials’ response to the ongoing global crisis, legislators’ attitudes toward reform, and the public’s perception of fairness. The failure is the fundamental misunderstanding of the events surrounding the bankruptcy of Lehman Brothers. We have inverted a morality tale about individual recklessness to become one about collective culpability through inaction.
Lehman failed as it should have failed. That we have ex post made it the fulcrum of the financial crisis misrepresents events in three material ways.” (emphasis added).
I am reminded of the words of the English philosopher Herbert Spencer, who said: “The ultimate result of shielding men from the effects of folly is to ﬁll the world with fools.”
Getting Lehman Profoundly Wrong
Vincent R. Reinhart
The American, September 21, 2010