The view from Lehman Brothers plus one

We are now at the anniversary of the collapse of Lehman Brothers. An event that certainly did not trigger the current crisis, but likely will always hold a special place in the history of this episode.

I would call Lehman's bankruptcy the moment when it became clear we had left the frying pan and moved most definitely into fire territory. This is true whether you agree with all or none of what we have done since in terms of our response.

Given the date, the press, in all its forms, is full of histories, theories, recriminations, etc. So here, in no particular order, is a round-up

Joe Nocera in the New York Times:

Almost everyone I’ve ever spoken to in Hank Paulson’s old Treasury Department agrees that without the immediate panic caused by the Lehman default, the government would never have agreed to make the loans needed to save A.I.G., a company it knew very little about. In effect, the Lehman bankruptcy caused the government to panic, which in turn caused it to save the firm it really had to save to prevent catastrophe. In retrospect, if you had to choose one firm to throw under the bus to save everyone else, you would choose Lehman.

Barry Ritholtz offers some myths of the collapse:

• Housing’s special status caused the collapse: Housing has long had a special status in America. But the mortgage interest rate deduction has been around for a century. It did not cause the collapse — the abdication of lending standards is at the heart of this crisis.

Jeffrey Friedman, Editor, Critical Review

Contrary to popular belief, then, the crisis of 2008 is best described as a crisis of regulation—not a crisis of capitalism.

Tyler Cowen writing in the New York Times:

But we are now injecting politics ever more deeply into the American economy, whether it be in finance or in sectors like health care. Not only have we failed to learn from our mistakes, but also we’re repeating them on an ever-larger scale.

Megan McArdle of The Atlantic:

Your best shot is at trying to structure firms that can withstand a crisis, and quickly shutter those that can't. The problem with that is that this was the mandate we gave our regulators before September 2008.

Simon Johnson at The Baseline Scenario:

Longer term U.S. growth prospects remain particularly uncertain – has consumer behavior really changed; if finance doesn’t drive growth, what will; is the budget deficit under control or not (note: most of the guarantees extended to banks and other financial institutions are not scored in the budget)? The implication, presumably, is higher taxes on the productive nonfinancial part of the economy – to pay for the implicit subsidies and ongoing rents of the financial sector.

Click through and read the whole thing on any or all. Feel free to leave a link in the comments section to any other articles on the subject.