Normally, I would agree with you, however, I don’t think anyone really knows what will happen tomorrow until it happens. Reason being, the unwind of counterparty defaults at Lehman could cause an atomic chain reaction in the worldwide banking system that can’t be quantified at this point.
The bigger story, in my opinion, is AIG, desperately calling on the Fed to give them a bridge loan to sell assets just so they can try and convince private equity to give them $40 billion! That’s an incredible INCREDIBLE story! That the Federal Reserve might even CONSIDER making direct loans to the private sector like a quasi-discount window is unthinkable. If they bail out AIG, they’re going to have to bail out all the other insurers, the big three automakers, the airlines, and, hell, if they’re going to do all that, why didn’t they bail out Lehman??
Bear Stearns was one company in trouble putting many at risk. This is about MANY companies in dire trouble and driving the international system to the brink of collapse. The Fed can’t bail everyone out unless they flood the market with treasuries (to raise cash) and drive the interest rate to a big fat ZERO. That’s a depression rate in this country. The Japanese were savers. There was money to circulate in spite of the ZIRP. The American consumer is going to be crushed and has nothing left to spend.
Let’s face it: despite whatever moral justification there may be for bailing out Frannie, Bear, AIG, etc., the fact is that the US financial system has ceased to resemble a capitalist one.
AIG was one of the strong insurance companies. What happens when the other goes. And the problem is that with Fannie and Freddie having 5 trillion of home loans on their books, it calls into question whether even the US govt can bail everyone out who needs bailed out.