Did Lehmans directly precipitate the credit crisis or was it just one contributing factor?
A. It was part of it. If the government hadn’t bailed Lehmans out we wouldn’t have avoided it. You could argue the reason we’re in crisis was because they bailed everyone out. They should have let the biggest institutions, Fannie and Freddie, fail. Instead they’ve lowered lending standards. They had higher standards before they went bankrupt. Q. Was the credit crisis avoidable or inevitable? A. It was inevitable. When you blow up a bubble the fact it will pop is inevitable. There will be losers; mistakes are made, resources were allocated in ways they absent the bubble wouldn’t have been. My analogy is if you get drunk you feel pretty good, but while you’re drunk you have a tendency to do pretty stupid things. When people sobered up and realised they had lent people money to buy condos in Florida they thought: ’How could I be so stupid?’ People were going to lose money – the problem for the government is these people also vote. There are people who took jobs that shouldn’t have existed
Related Questions
- Much of Foundation funding supports existing programs; what are the benefits of contributing through the Foundation rather than giving directly to those programs?
- Why are my borrowers credit scores lower on QC Credit report than what they got online directly from the bureaus?
- What happens when a country goes bankrupt?
