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Bankocracy

October 30, 2009

by John Lanchester
from the LONDON REVIEW OF BOOKS

lrb31The Murder of Lehman Brothers: An Insider’s Look at the Global Meltdown by Joseph Tibman
Brick Tower, 243 pp, £16.95, September 2009, ISBN 978 1 883283 71 1
BUYA Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers by Larry McDonald, in collaboration with Patrick Robinson
Ebury, 351 pp, £7.99, September 2009, ISBN 978 0 09 193615 0

The collapse of the investment bank Lehman Brothers over the weekend of 13-14 September last year was an event of world-historical magnitude. What was so important about it wasn’t the local havoc it caused, the loss of jobs and livelihoods and savings; it wasn’t even the fact that the US Treasury’s decision to allow the bank to go bankrupt triggered a full-blown stock market collapse, the nauseatingly expensive bail-out of AIG just a few days later, the seizing up of credit markets, the near implosion of the global economy, and then a worldwide recession/ depression. Those things are all a very big deal; but the most important lesson of Lehman was that it established, irrefutably, the fact that the big Western banks are now Too Big to Fail. Their size, and their interconnectedness, is such that these institutions can’t be allowed to die a natural death, whatever happens. These banks have an implicit guarantee that if they ever get sufficiently deeply into trouble, the taxpayers will be there to bail them out. more

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