Gretchen Morgensen picks up an important point in the Fed transcripts from 2008. The discussion around the decision to allow Lehman to go bankrupt makes it very clear that it was a decision. In other words the Fed did not rescue Lehman because it chose not to.

This is important because the key regulators involved in this decision, Ben Bernanke, Hank Paulson, and Timothy Geithner, have been allowed to rewrite history and claim that they didn't rescue Lehman because they lacked the legal authority to rescue it. This is transparent tripe, which should be evident to any knowledgeable observer. (Who has legal standing to stop a bailout?)

Anyhow, in retrospect the choice not to rescue Lehman in a context where the Fed was unprepared to deal with the consequences certainly was disastrous. We all make mistakes, but this gang of three made a whopper. And reporters have an obligation to make this clear to the public, not to assist in the cover-up.

Btw, on the topic of whopper mistakes, someone sent me this collection of Bernanke clips on the housing bubble.

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