Tuesday, October 7, 2014  The Lehman Rescue Efforts: What Went
Wrong; Was a Better Way Available?  By Yusuke Horiguchi October
7, 2014  1. In a systemic financial crisis, strong forces of
contagion--a virulent form of negative externality--put even the
solidest financial firms with no faults of their own at serious
risk, because of other firms' plight. This is a notorious
example of market failure, providing a justification for public
intervention aimed at preventing the financial system's
collapse, typically involving taxpayer money. This is a standard
economic analysis, widely accepted, at least at this level of
generality, and with a straightforward prescription on the
general direction of policy to be followed when coping with
severe system-wide financial stresses.  It needs emphasis,
however, that the prescription is applicable only to systemic
crisis situations.   2. The situation of September 2008 and the
ensuing few months was none other than that of an epochal
systemic crisis. It in fact was the epit