There are some remarkable passages in a review of William Cohan’s “House of Cards” in the Wall Street Journal today. The book examines the demise of investment bank Bear Stearns, which was bailed out with $30 billion in taxpayer money a year ago next week.
The book doesn’t come out until early next week (I checked the Dupont Circle stores, which seem to have everything earlier than anyone else), but here’s a taste of some highlights of James Freeman’s review:
“Ranked by assets, Bear Stearns was not even in the top 10 of U.S. financial firms. But in Washington there were fears of so-called systemic risks, even if such risks were not completely understood. Mr. Cohan quotes Timothy Geithner, then the president of the New York Fed and now Treasury secretary, opining that ‘there’s no rulebook for these things.’”
” … But while Bear’s top executives aggressively sought the federal lifeline, not everyone at the firm thought that such help was deserved. ‘There were voices,’ reports Mr. Cohan, ‘that the free market should be the one to render judgment on the firm’s years of strategic and tactical choices.’”
” … Mr. Cohan quotes a senior managing director at the firm: ‘My personal view is that [Bear Stearns] should have been made more of a victim. I don’t think it should have been saved. I don’t buy the argument that the whole system would have unraveled and collapsed. I really don’t. I think it’s a terrible precedent. I don’t think the Fed should be in the business of assuming this kind of risk. I think it would have been a much better wake-up call for everybody had things followed their course.’”
Now you tell us.
Read the whole thing.
— Jon Ward, White House reporter, The Washington Times
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