Wednesday, October 15, 2008
Bernanke's defense to let Lehman Fail
Mr. Bernanke also defended the U.S. government's decision to allow Lehman Brothers Holdings to fail. "A public-sector solution for Lehman proved infeasible, as the firm could not post sufficient collateral to provide reasonable assurance that a loan from the Federal Reserve would be repaid," he said. Those circumstances were different from those involving American International Group Inc., which the Fed in September agreed to backstop with an $85 billion loan that has since been increased with another $37.8 billion credit line. "In the case of AIG, the Federal Reserve and the Treasury judged that a disorderly failure would have severely threatened global financial stability and the performance of the U.S. economy," Mr. Bernanke said. Meanwhile the Fed determined that its loan to AIG would be "adequately secured by AIG's assets."