Niall Ferguson: Capitalism Replaced by "state-guaranteed monstrosity"

Matt Welch | September 15, 2009

The British historian looks back at Lehman, and laments:

Not everything in history is inevitable; contingencies abound. Sometimes it is therefore right to say "if only". But an imagined rescue of Lehman Brothers is the wrong counterfactual. The right one goes like this. If only Lehman's failure and the passage of Tarp had been followed – not immediately, but after six months – by a clear statement to the surviving banks that none of them was henceforth too big to fail, then we might actually have learnt something from this crisis.

The real tragedy is that the failure of Lehman has left Wall Street's survivors both bigger in relative terms and more secure politically. As long as the big banks feel confident that they can count on the government to bail them out – for who would now risk "another Lehman"? – they can more or less ignore calls for lower leverage and saner compensation.

If only we had learnt from Lehman that no bank should be "too big to fail", we might still have a real capitalist system, instead of the state-guaranteed monstrosity that is the real legacy of last year's crisis. If only.

Link via The Weekly Standard's blog.

Comments

Warty|9.15.09 @ 3:01PM|#

Niall Ferguson has a pleasant brogue, and he head-butts other economists at the slightest provocation.

Tim Cavanaugh|9.15.09 @ 4:31PM|#

If only Lehman's failure and the passage of Tarp had been followed - not immediately, but after six months - by a clear statement to the surviving banks that none of them was henceforth too big to fail, then we might actually have learnt something from this crisis.

That statement has been made clearly many times. The president's speech yesterday contained many clear statements to that effect.

And my five-year-old kid knows it's all bullshit, because actions speak louder than words. The passage of TARP contained 700 billion clear statements to the contrary.

And what's the difference if you wait six months?

|9.15.09 @ 4:37PM|#

Yeah, but the sky was falling, and we had to prop it up with giant stacks of money.

Sean W. Malone|9.15.09 @ 4:53PM|#

Giant stacks of money probably make good building materials. Someone should build a house out of them... At least if they did that it might curb inflation some.