BLOOMBERG: Federal Reserve Chairman Ben S. Bernanke said he regretted not saying in congressional testimony shortly after the failure of Lehman Brothers Holdings Inc. in 2008 that the central bank had no authority to save the firm.
The testimony at the time “has supported this myth that we did have a way of saving Lehman,” Bernanke said today in response to questions during a Financial Crisis Inquiry Commission hearing in Washington. “I regret not being more straightforward there because clearly it has supported the mistaken impression that in fact we could have done something.” ..
“It was a judgment at that moment, with the system in tremendous stress and with other financial institutions under threat of a run or panic, that making that statement might have even reduced confidence further and led to further pressure,” Bernanke said today… (more)
EDITOR’S NOTE: In his memoir “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System”, then Secretary of the Treasury Henry (Hank) Paulson, Jr. describes how he, Bernanke and others struggled unsuccessfully to find legal authority to save Lehman Brothers which was not a bank. Emergency legislation was rushed through which enabled private financial institutions to come under the banking code and thus provided the Federal Reserve Bank and other agencies with the means for assisting them through what otherwise would likely have been a total financial melt down. They all were in danger and acknowledged it!
Paulson’s book is reasonably comprehensible to the lay person and well worth reading.
