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December 2, 2008 8:46:33 PM CST

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Paulson Played Cards Well in High-Stakes Showdown

Posted Sep 16, 08 12:27 PM CDT in Opinion,  Business 

(Newser) – Cue the Kenny Rogers, suggests Steve Pearlstein in the Washington Post; “Hank Paulson knows when to hold ‘em and when to fold ‘em.” Paulson was so determined not to commit federal dollars to bail out Lehman Bros. that when the banks said they couldn't step in without help, he called their bluff. It was the banks that blinked, he writes—not rescuing Lehman itself, but cushioning the blow to the economy.

A one-day, 504-point market drop is a small price to pay, Pearlstein writes, to make the point that taxpayers are not Wall Street’s piggy bank. But with an even bigger AIG challenge in the wings, don’t think the government is done meddling in financial markets. When bubbles burst, fixing them is “never neat or even fair.”

Source Washington Post

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An employee of the Korea Stock Exchange walks by an electronic stock price graph in Seoul, South Korea, Tuesday. Lehman Brothers sought funding from Korea Development Bank shortly before its collapse.   (AP Photo)
Treasury Secretary Henry Paulson gestures as he answers questions, Monday, Sept. 15, 2008, in the White House press room in Washington.   (AP Photo/Pablo Martinez Monsivais)
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He said to them, in effect, if you're not worried that a Lehman failure would trigger a market meltdown that would take you down with it, then neither am I. - Steve Pearlstein, Washington Post

The challenge for policymakers is to keep that process as orderly as possible without trying to protect failing companies or prevent the inevitable decline in incomes and asset prices.

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Financial Crisis • bailout • subprime crisis • Henry Paulson • Lehman Brothers • banking industry • The Fed


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