Dollars and Jens
Wednesday, October 15, 2008
This is interesting; Bernanke has just asserted, in answer to a question about "allowing Lehman to fail", that the Fed didn't have the legal power to do anything to prevent it; they couldn't lend to Lehman as they did in the Bear Stearns case because there wasn't any collateral to lend against. This is the first time I've heard any suggestion that it wasn't a voluntary decision to let Lehman go.
(Incidentally, I read a couple weeks ago where some automakers were suggesting that they would like the same discount-window access as has been broadened to non-bank financial institutions. My immediate thought was "how much discount-window--accepted collateral do car companies have?" I'm not sure some of the people realize that this is all secured credit the fed is giving out; the AIG assistance has in fact involved creative ways of bending in new directions to collateralize the quantities of credit AIG needs to keep functioning.)
Update: A transcript of that comment, and more.