Stan goes away to work on his top spin backhand, and look what happens. If I had wanted to own Lehman Brothers, I had ample opportunity. I hope the Feds don't think there was some missing market that needs to be filled through another bailout. Lest anyone forget about the path of these institutions to their current position, I submit this report from early 2006:
Alan G. Hevesi, the New York State comptroller, announced yesterday that Wall Street bonuses were estimated to hit a record $21.5 billion for 2005, surpassing the previous record of $19.5 billion, set in 2000. Those bonuses were driven by record profits at many of Wall Street's major investment banks, including Goldman Sachs, Bear Stearns and Lehman Brothers.<!--break-->
The Street's munificence will be felt throughout New York: Mr. Hevesi estimated that New York State would collect $1.5 billion in tax revenue from those bonuses, and New York City about $500 million.
It was not so long ago that the fallen were mighty. In the good times, they made profits, paid some taxes, and kept the difference. In the bad times, they are relieved of their tax burden but must also keep their losses. These institutions had their opportunities to not be fools. They passed it up. The federal government should not act on behalf of the taxpayers to shield them from the consequences. To the extent that the federal government gets involved, it is to make credit (but not subsidies) available to help other institutions -- we could call them the less imprudent ones -- who must absorb losses due to the collapse of these institutions. Nothing in that respect has changed in the last 6 months.
If you read only one post on the financial meltdown (not an easy task), I recommend Tim Duy's comments over at Economist's View.