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Mark Gilbert

Geithner Still Can't Explain Lehman

Tim Geithner's decision to let Lehman go bust still seems crazy after all these years.
Wonder why Lehman failed?        Photographer: Prashanth Vishwanathan/Bloomberg
Wonder why Lehman failed?        Photographer: Prashanth Vishwanathan/Bloomberg

One of the most puzzling aspects of thefinancial crisis was the zig-zag-zig by the U.S. authorities, who saved Bear Stearns from bankruptcy, then let Lehman Brothers fall off the cliff only to rescue AIG a day later. After plowing through the first half of Tim Geithner's book"Stress Test," I'm none the wiser.

Geithner, who was at the helm of the New York Federal Reserve during the meltdown and then became President Barack Obama's Treasury secretary in its aftermath, has no time for "moral hazard fundamentalists" who object to bailouts for banks. "The truly moral thing to do during a raging financial inferno is to put it out," he argues. So why didn't he throw buckets of dollars on Lehman when it was blazing away?