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The Buck Broke Here


Paying for Greenspan and co.'s mistakes.

Let me try to put into perspective the events of the last 24 hours, which have been significant, to say the least. Taken together with the government's recent actions, I think you can say that this has been one of the most extraordinary periods in US financial history.

Beginning with the AIG (AIG) bailout, it's good news and bad news. (More about the bad news below.) I believe it's good news in the sense that the government figured out a way to punish the shareholders while at the same time, not allowing the policyholders, annuity holders and others to be crushed, thereby forcing the country to deal with the knock-on effects of it all. (One might argue that the policyholders should have been more careful, but that's certainly an argument for another day.)

It's important to understand that the problems we're facing built up over Greenspan's 20-year reign, which the present crew's now trying to clean up. So while I'm sure we all find these bailouts repugnant, I believe we're making progress: Risk is being reintroduced into the equation.

I never liked the way Bear Stearns was handled. However, I was fairly comfortable with Fannie Mae (FNM) and Freddie Mac (FRE), given their implied government backing. As for Lehman (LEH), I think that was handled the way it should have been.

2, 4, 6, 8, Who Do They Like to Excoriate?

And while I'm on the subject of Lehman, much has been made of short sellers and how they -- along with the no-uptick rule -- are ruining the financials. Lehman is a perfect example of how that's not the case. Its books were shown to virtually everybody on the planet over the age of 16 with more than 50 bucks to their name - and nobody wanted it, because it was essentially a bankrupt entity once its assets and liabilities were netted out.

To suggest that short-sellers made that happen is just ludicrous. If short-sellers were so stupid as to drive a viable, valuable company below its worth, buyers around the world would have leapt at the chance. I know that's a bit of a digression, but I'm sick and tired of hearing the wrong people blamed.
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