Thursday, February 12, 2009

Fed in Talks to Add Primary Dealers as Sales Rise to Record

The Fed obviously wants to preserve the primary dealer system as evidenced by their desire to add four new firms to the list. However, the real question is, why, then, did they let two fail? The failure of Lehman and Bear Stearns triggered massive financial instability and brought about a systemic shock felt around the world. Was it really worth all that destruction if they desire to preserve the primary dealer system anyway? Keeping Bear and Lehman running and helping to nurse them back to health would have been far, far, less costly than allowing them to go under and then going out and looking for new dealers. It seems really stupid.

Read story here.


googleheim said...

Which firm did Paulson come from ?
Morgan Stanley ? was that a competitor to Bears and Lehman ?

any preferentiality here ?

WAMU's virtual linkage to Lehman
got sucked up into JP Morgan Chase ?


mike norman said...

He came from Goldman.