We need to demand an immediate release of the e-mails, phone records, and meeting notes from the NY Fed and key Lehman principals regarding the NY Fed’s review of Lehman’s solvency. If, as things appear now, Lehman was allowed by the Fed’s inaction to remain in business, when the Fed should have insisted on a wind-down (and the failed Barclay’s said this was not infeasible: even an orderly bankruptcy would have been preferrable, as Harvey Miller, who handled the Lehman BK filing has made clear; a good bank/bad bank structure, with a Fed backstop of the bad bank, would have been an option if the Fed’s justification for inaction was systemic risk), the NY Fed at a minimum helped perpetuate a fraud on investors and counterparties.
This pattern further suggests the Fed, which by its charter is tasked to promote the safety and soundness of the banking system, instead, via its collusion with Lehman management, operated to protect particular actors to the detriment of the public at large.
So what do we have here? Tim Geithner, the same guy whose dog ate his tax returns (metaphorically) and yet is now the head tax collector also seems to be the guy who led the NY FRB’s hand-in-hand collusion with Lehman Brother’s through an Alice In Wonderland-like foray of chicanery and fleecing of the same Treasury Geithner now heads. Who knew? What could go wrong?
You just can’t make this stuff up.