I'm watching the Bank of America -Merrill merger press
conference in shock, reflecting on the fact that coupled with
Lehman, it means that the housing crisis has now led to the
collapse or takeover of three out of the top five U.S. investment
banks in a matter of months. Add the Fannie and Freddie bailout to
the mix -- and the fact that one of the world's largest insurers,
AIG, is also faltering -- it's a pretty scary proposition for the
economy, which I'm now thinking hasn't come close to bottoming out.
These were not fly by night operations, but vaunted institutions
that you never thought were going anywhere.
The one positive aspect of the news today is that the Fed and
the Treasury Department finally drew a line in the sand and decided
not to step in with yet another bailout (in hindsight, we see what
a farce the Bear Stearns action was, since Lehman ended up
collapsing and Merrill ended up having to seek a buyer anyway).
This is what happens in capitalism. Companies mess up, and no
matter how big, they're allowed to fail and lessons are
learned.
Unfortunately, in this presidential election, we're facing a
choice between two candidates who have varying degrees of hostility
toward markets. The new McCain-Palin
TV ad calls for, "tougher rules on Wall Street to protect your
life savings." McCain may support lower taxes than Obama, but he
still has the regulatory itch.
topics:
Taxes
