After announcing the largest loss in its 160 year history, no one will be suprised if Lehman Brothers turns to Treasury and the Fed for a bailout. The federal government should just say no.
By this time, everyone has known for a considerable period of time about Lehman’s problems. The financial exposure to Lehman has to have shrunk. The government needs to show that it isn’t in the business of bailing out every high-priced pinstripe suit on Wall Street. The taxpayer should only be on the hook to avert threats that might take down the economy and financial system. That’s not Lehman. Not now.
The U.S. Treasury and the Fed should politely tell Lehman to go away. It has to find its saviour in the private markets.
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