

FAQ’s of Lehman and A.I.G. - by U of Chicago economists at Freakonomics - robg
http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-the-recent-financial-upheavals/

======
fallentimes
Wow those guys are smart. I think I'm going to start calling bad investors and
bad investments "Lehmans".

The article was full of great quotes, but I think I still love Cuban's quote
the best regarding the current financial situation:

 _"One last point, has the irony of 3 of largest companies in the country who
make their money giving financial and insurance advice to companies and
individuals, are facing ruin from the advice they gave themselves ? If this
isnt a lesson to every individual who is taking advice from an investment
firm, i dont know what is."_

~~~
steveplace
If life gives you Lehmans, make Lehman-ade.

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nazgulnarsil
I prefer mencius moldbug's MMORPG explanation: [http://unqualified-
reservations.blogspot.com/2008/01/straigh...](http://unqualified-
reservations.blogspot.com/2008/01/straightforward-explanation-of-present.html)

~~~
bokonist
He's got some excellent new commentary here:
[http://blogs.cfr.org/setser/2008/09/16/lehman-v-
argentina/#c...](http://blogs.cfr.org/setser/2008/09/16/lehman-v-
argentina/#comment-112661)

~~~
nazgulnarsil
yeah, i read that linked from his post today. UR is the only blog I follow
closely.

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ryanb
By far the best summary of the recent financial crisis that I've read yet.

interesting quote:

"... if the government had rescued Lehman, it would have repudiated the claim
that the Bear rescue was extraordinary; it would have also conceded that in
the six months since Bear failed, neither the new facility that it set up nor
the other steps to make markets more robust were reliable. Essentially, the
Fed and the Treasury would have been admitting that they had lied or were
incompetent in stabilizing the financial system — or both."

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kqr2
This podcast from NPR's Fresh Air is also a good overview of the Lehman
Brothers bankruptcy and AIG bailout:

[http://www.npr.org/templates/story/story.php?storyId=9468642...](http://www.npr.org/templates/story/story.php?storyId=94686428)

There is also a link to a "Our Confusing Economy Explained" which is a good
introduction to the financial "weapons of mass destruction".

------
logjam
"So even for people whose own circumstances have not much changed, the cost of
the credit is going to rise. For an individual or business that falls behind
on payments or needs an increase in short-term credit because of the slowing
economy, credit will be much harder to obtain than in recent years.

This is going to slow growth."

Bang. And there's the dirty little secret about our economy that the hard-core
capitalists never mention. The theory is that in unfettered capitalism, those
who take foolhardy risks are punished. What few mention is that the economy is
so interdependent that the foolhardy decisions made by a few ripple through
the entire system.

Now we all suffer for the greed and incompetence of a few.

This is why regulation is vital. Business people have shown over and over
again that they are just as incompetent and inefficient, if not strikingly
more so, than government.

Cooperation, rather than competition, is the higher good.

~~~
gaius
_Business people have shown over and over again that they are just as
incompetent and inefficient, if not strikingly more so, than government._

I'm old enough to remember the nationalized industries, British Gas, British
Telecom, British Airways and so on. They became infinitely better almost
overnight when they were forced to compete in the market rather than being
subsidised monopolies.

 _Cooperation, rather than competition, is the higher good._

Even Marx didn't believe that, that's why he was always banging on about
dialectic materialism.

Name _one_ significant scientific or technological advance that didn't come
about through competition, even if it was only to see who could do it first.

~~~
aswanson
Moon landing, arpanet...

~~~
corentin
> Moon landing

is the result of intense competition with soviet Russia.

> arpanet...

is the result of a competition between different contractors ultimately won by
BBN.

~~~
aswanson
_> Moon landing

is the result of intense competition with soviet Russia._

debatable, but what about this one:
<http://en.wikipedia.org/wiki/Huygens_probe>

and these: pythagorean theorem, sieve of erasthones, Clarkson-Erdős theorem,

