I am confused. Wasn’t a major reason to do a BS bailout for BS to protect the counterparty’s. I could be totally wrong, but I thought the logic went something like this:
-Bear fails.
-Sells all assets in firesales to pay debts.
-Market prices appear for MBS/CBO/CDO2 and etc
-Deadweight still in M3 gets repriced
-More institutions start failing due to big losses
If Lehman goes under, doesn’t that start this all over again, making the Bear bailout pointless cept for the few billion dollar hit the treasury will take??????? Or is Lehman that much smaller than Bear was?
