Why Point Fingers on Lehman?

In today’s New York Times column, Andrew Ross Sorkin puts out this idea:

Mr. Geithner’s involvement in several ultimately ill-fated efforts to buttress the American financial system is the very reason some Wall Street C.E.O.’s — a number of whom spoke on the condition of anonymity for fear of piquing the man who regulates them — question whether he’s up to the challenge. [ . . . ]

Perhaps what has most people on Wall Street stirring is Mr. Geithner’s role in the fall of Lehman. At the time of its bankruptcy, he, along with Mr. Paulson, appeared to be the most vocal in supporting the government’s refusal to bail out the firm, according to people involved in various meetings. With hindsight, many in the financial industry blame a deepening of the global financial crisis on the government’s decision to let Lehman crumble.

Let’s think about this: the persons who bear the most responsibility for the deranged state of the financial system are questioning why Geithner didn’t save Lehman. And they’re doing it anonymously. Does that seem right?

The argument against letting Lehman fail is based on the fallacy that because things got much worse after the failure of Lehman it was therefore the cause of the deterioration. There may be a solid argument for why Lehman should have been saved. But no one has made that case. And the evidence of continued bailouts, doesn’t (on the face of it) suggest saving Lehman’s bond holders would have the dominoes from falling.

Sorkin’s anonymice (to steal a term from Slate’s Jack Shafer) need to make a public case for what could have been done for Lehman. They need to show how that fits into a broader plan to solve the crisis. If they have one.

It’s not that they shouldn’t attack Geithner. Chris Whalen, quoted in the column, has a fully reasoned critique of the man. David Kotok too has raised numerous legitimate questions about Geither’s actions that should be explored in confirmation hearings, if nothing else to add clarity to everyone’s understanding of markets.

But raising their doubts in public would call attention to the fact that Wall Street’s CEOs don’t have their own plan for how they’re going to deal with this crisis of their own making. Let them go to Washington like the Auto company CEOs and appear before the cameras.

But they CEOs don’t deserve the protection of the New York Times to piss and moan about how Geithner failed them when they haven’t taken responsibility for what has become of the financial system.


Where Was Geithner in Turmoil?
The New York Times, November 25, 2008

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