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.”