This
week marked 10 years since the harrowing descent into the financial
crisis — when the huge investment bank Lehman Bros. went into
bankruptcy, with the country’s largest insurer, AIG, about to follow. No
one was sure which financial institution might be next to fall.
The
banking system started to freeze up. Banks typically extend short-term
credit to one another for a few hundredths of a percentage point more
than the cost of borrowing from the federal government. This gap
exploded to 4 or 5 percentage points after Lehman collapsed. Federal
Reserve Chair Ben Bernanke — along with Treasury Secretary Henry Paulson
and Federal Reserve Bank of New York President Timothy Geithner —
rushed to Congress to get $700 billion to bail out the banks. “If we
don’t do this today we won’t have an economy on Monday,” is the line
famously attributed to Bernanke.
The
trio argued to lawmakers that without the bailout, the United States
faced a catastrophic collapse of the financial system and a second Great
Depression.
Neither part of that story was true.
Still,
news reports on the crisis raised the prospect of empty ATMs and checks
uncashed. There were stories in major media outlets about the bank runs
of 1929.
http://www.latimes.com/opinion/op-ed/la-oe-baker-bailout-20180914-story.html
No comments:
Post a Comment