The Free Market Fairy Fails Lehman

Bloomberg:

In the biggest reshaping of the financial industry since the Great Depression, two of Wall Street's most storied firms, Merrill Lynch & Co. and Lehman Brothers Holdings Inc., headed toward extinction.

The phrase "since the Great Depression" is just classic, you know, since all of this started when Free Market Fairy believers of all stripes decided to lift, what were they called again, oh yeah, "Depression-era regulations" on banks and investment firms. The whole thing was spearheaded by Phil Gramm, passed by a Republican congress and signed into law by Bill Clinton. The rest of the article is what typically passes for journalism these days, an "oh gosh, how did this happen?" piece, when the outcome was as inevitable as a brickwall across a highway.

I'm sort of flabbergasted by the "no one saw this coming" angle. For the last several years, Paul Krugman wrote a New York Times column at least once a month about how a train wreck was inevitable.

Of course at the time he was labeled "shrill" and "alarmist".

Posted by Bill Higgins on 2008-09-15

i'm not sure i grok the idea of your Free Market Fairy in this case. shouldn't businesses be free to fail in a free market? isn't that what happened? is there a reason you never post anything on the failure of government to regulate 'just right?' or how regulatory capture impedes fair competition? a sense a bit of a confirmation bias in your own reporting. (i'm not free of it myself.)

Posted by unacoder on 2008-09-15

unacoder: yes, but I presume they shouldn't take the whole industry down with them?

Posted by martin on 2008-09-17