With Lehman gone, the little oligarchy of banks still dominates Wall Street, but the clique is a little bit smaller. This may be the worst possible outcome for the future of our financial markets. Worse even than bailing all every one of the banks out, or letting them all fail. If the whole system had gone down, we’d at least have the chance to rebuild a better one.
But with fewer giants, there is even less competition on Wall Street than before the crisis. The banks in the now smaller club are even more likely to do what monopolists always do: fight transparency and protect their own profits at the expense of small businesses and consumers. And with fewer, but much bigger giants, it will be even harder for regulators to avoid bailing any one of them out if it fails. No matter how badly their managers behave. Before the crisis, four or five of them were probably too big to fail. Now, they all are.
I never thought I would say that I miss Lehman. But as I look out on the new Wall Street landscape, same as the old one, except worse, I’m tempted to put a few flowers on Lehman’s financial grave.