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Barry Ritholtz

Let's Put the Lehman Bailout Debate to Rest

Rescuing the securities firm wouldn't have mattered. The financial crisis was coming no matter what.
Sold for scrap.

Sold for scrap.

Photographer: Oli Scarff/Getty Images

An old meme in new clothing has been circulating recently: The Federal Reserve could have and should have saved Lehman Brothers. It had the resources, the legal authority and the obligation to do so; its failure to act let a modest financial fire become a full-blown credit crisis.

It is an interesting post-crisis theory from academia. But some of the claims are irrelevant, and almost all of them are wrong.