We Will Pay for Letting Lehman Die

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What did the Federal Reserve think Lehman did? Do IPOs? Buy and sell stocks? Trade bonds? What did they think Lehman's business model was?

Now that we see another $500 billion going to guarantee money funds, as per, of course, Lehman, now that we see tons of firms that relied on Lehman for swaps and insurance on other financial instruments, now that we see Lehman was a huge commercial lender (check out the New York Post today on properties where work has been stopped), we recognize that Lehman had insinuated itself into virtually every nook and cranny of the financial firmament.

Lehman's enhanced margin accounts alone, those internal funds where you could get a higher return than on almost any other margin accounts -- now frozen -- are reputed to have only about $60 billion locked up. I think that's conservative. Or when you consider that Lehman was an issuer of so much paper that was considered to be a decent investment for so many firms, you struggle to recognize how it could have been so successful at placing so many bonds and preferreds, until you realize that it was one of the most trusted of firms, in part because of the reputation -- now totally in tatters -- of Dick Fuld.

Which brings me full circle to the Federal Reserve. Dick Fuld was a member of the New York Federal Reserve, this amazingly important body of execs who are tied in like you wouldn't believe. He shared information every day -- at least he told me he did -- when the stock was at $44. I get the impression that the much loved and revered Tim Geithner, president of the New York Fed, knew or, more importantly, should have known some of the tentacles of Lehman. Knowing what we know now -- and he was privy to all of this -- the notion of letting this company go down the drain is just stupefying.

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