US Treasury Secretary Henry Paulson drew a line in the sand. Lehman Brothers, in spite of its auspicious near-160-year history and revenues of US$59 billion, would not be bailed out. The market is king. The move sent Merrill Lynch, fabled as 'the thundering herd' with a bull as its mascot, stampeding for cover into the arms of Bank of America.
Merely a week later, the financial storm washed away the government's resolve and it rushed to spend another US$85 billion rescuing AIG (American International Group), a US$1 trillion 'national treasure' insurance firm decreed too big to fail.
The tragedy is that the government of George W. Bush has been asleep. It should have seen this coming, not merely weeks ago when mortgage companies Fannie Mae and Freddie Mac, and Bear Sterns were bailed out, but years ago.
If it had been awake, it could have saved the US taxpayer a bill that is heading towards US$1 trillion in handouts, guarantees and loans.
The bigger tragedy is that this is merely the tip of the melting iceberg of fiscal global warming that is dissolving the US economic and financial empire. Sadly, evidence of creative thinking anywhere that would help contribute to making a new world is in desperately short supply, especially in Asia.
Some pundits take comfort from the fact that the fall on Wall Street has - so far - been less than the 1929 crash. But the fallout continues. Rumours gather about new banks in danger. Interbank lending rates are still high in spite of government infusions of liquidity, meaning that banks are scared to lend to each other. If banks don't trust each other, why should anyone trust the system?
