Comments on: How the Fed slept through Lehman

By: HBC

HBC — Fri, 19 Mar 2010 06:59:07 +0000

The Fed didn’t sleep through Lehman. They were wide awake and as active as ever they get, which is why rendering the Fed unconscious once and for all is becoming an ever more attractive proposition.

By: EpicureanDeal

EpicureanDeal — Wed, 17 Mar 2010 01:11:42 +0000

Confidence or no, Felix, here is a model of how that could look:

http://epicureandealmaker.blogspot.com/2 010/03/poachers-turned-gamekeepers.html

By: csissoko

csissoko — Tue, 16 Mar 2010 20:30:12 +0000

Surely the most plausible explanation for the delay in allowing Lehman to fail is that September 2008 was the drop dead date for the major dealers to be online for centralized submission and confirmation of CDS trades.

The regulators successfully prevented a collapse of the CDS market (which was very much at risk in March 2008 because so much trading was done via email, etc), but wrongly assumed — because everybody had plenty of time to hedge a Lehman failure — that there would not be chaos in the money markets.

By: OnTheTimes

OnTheTimes — Tue, 16 Mar 2010 19:27:02 +0000

Maybe the Fed and the SEC didn’t do anything about Lehman or any other incompetently run bank because the Bush administration did not believe in regulation. We had an administration and a congress that believed the market would take care of everything, and there was no need for the federal government to get involved. Net result: the people running the financial industry did what was best for themselves.

This attitude still persists today, as the feckless majority Democrats defer (cower is probably a better word) to the minority Republicans, whose rejections of all calls for new regulations are just facades for their ideology-based objections to regulation of any kind. I guess they still haven’t seen the email about how the self interests of executives (especially those in the financial industry) do not align with the self-interest of the firms they run, let alone the best interest of the nation.

You can have all the rules you want, if nobody is there to enforce them, it’s not going to matter.

Everybody needs to lower their expectations. Republicans want nothing from government, and the Democrats are going to cave.

By: Claremont1

Claremont1 — Tue, 16 Mar 2010 18:31:04 +0000

“But there’s a possible glimmer of good news too: that the Fed had people capable of putting together a decent stress test, and that the SEC sensibly deferred to those people in terms of stress test design. In other words, the Fed has the ability to regulate; all that’s needed now (and was missing in 2008) is the willingness to do so and to bare teeth once in a while.”

Are you really saying that the fact that Lehman failed the Fed’s stress tests is evidence that “the Fed has the ability to regulate”? From this one incident we can tell that “the Fed had people capable of putting together a decent stress test”?

Those conclusions, and the supposed good news they imply, do not follow at all. What the Fed did is the equivalent of getting an easy question right on a very long test. This says nothing about their ability in other areas of regulation, and its not even safe to conclude from this isolated incident that their stress tests will be be correct in the future.

So no, this does not mean the Fed has the ability to regulate, but is just lacking the willpower. At all.