Domino effect

A domino effect?

Bear Sterns, Countrywide, Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch. Who is next?

At the NYT, a piece defending the rescue of A.I.G. under the “Too Big to Fail” paradigm:

Regulators knew that if Lehman went down, the world wouldn’t end. But Wall Street isn’t remotely prepared for the inestimable damage the financial system would suffer if A.I.G. collapsed. […]
The Fed cannot afford to stand on principle. The myth of free markets ended with the takeover of Fannie Mae and Freddie Mac. Actually, it ended with their creation.

But as we learned yesterday, A.I.G. can now pretty much borrow money from itself. Nice.

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