Treasury, Fed, leave Lehman to the wolves

Stock market in a free fall on Sunday night as talks to save Lehman fail. Treasury Secretary Hank Paulson said no “taxpayer funds” would be used to save the firm. This is a purely political decision, nothing more. It also ignores the effect to taxpayers of a financial collapse that destroys the economy. Many critics of the Fed and Federal government will get to see their preferred version of a “workout,” as in, “let the markets take care of it.” The outcome is likely to be violent and terrible for stocks, the dollar and the economy.