Why Did the Feds Bail Out AIG but Not Lehman?

Prominent financial blogger breaks it down into laymen's terms.

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Barry Ritholtz over at The Big Picture has a great post today on why the government rescued insurer AIG and investment bank Bear Stearns but refused to bail out Lehman Brothers.

From The Big Picture:

• Lehman Brothers was like the little kid pulling the tail of a dog. You know the kid is going to get hurt eventually, and so no one is surprised when the dog turns around and bites the kid. But the kid only hurts himself, so no one really cares that much.

• Bear Stearns is the little pyro—the kid who was always playing with matches. He could harm not only himself, but burns his own house down, and indeed, he could have burnt down the entire neighborhood. The Fed stepped in not to protect him, but the rest of the block.

• AIG is the kid who accidentally stumbled into a bio-tech warfare lab...finds all these unlabeled vials, and heads out to the playground with a handful of them jammed into his pockets.


TAGS:
Federal Reserve
government intervention
AIG, Inc.
Lehman Brothers

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