The Bailout's Biggest Flaw

The government's epic intervention after Lehman's bankruptcy averted disaster. But that success made it harder to address what ailed the financial system in the first place

Tom Schierlitz / Getty

Last Sept. 15, the venerable investment-banking firm of Lehman Brothers--saddled with a lot of dud real estate investments and unable to persuade its jittery creditors to keep lending it money--filed for bankruptcy protection. It was the largest bankruptcy ever in the U.S., but the really big news was what happened afterward. First came a financial panic that threatened to shatter the global capitalist order, followed by an unprecedented--and unprecedentedly expensive--effort by governments on both sides of the Atlantic to patch things up.

You already knew all this, of course. It happened just last year, and in recent weeks, the news media...

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