FAQ’s of Lehman and A.I.G. - by U of Chicago economists at Freakonomics

Wow those guys are smart. I think I'm going to start calling bad investors and bad investments "Lehmans".

The article was full of great quotes, but I think I still love Cuban's quote the best regarding the current financial situation:

"One last point, has the irony of 3 of largest companies in the country who make their money giving financial and insurance advice to companies and individuals, are facing ruin from the advice they gave themselves ? If this isnt a lesson to every individual who is taking advice from an investment firm, i dont know what is."

I prefer mencius moldbug's MMORPG explanation: http://unqualified-reservations.blogspot.com/2008/01/straigh...

By far the best summary of the recent financial crisis that I've read yet.

interesting quote:

"... if the government had rescued Lehman, it would have repudiated the claim that the Bear rescue was extraordinary; it would have also conceded that in the six months since Bear failed, neither the new facility that it set up nor the other steps to make markets more robust were reliable. Essentially, the Fed and the Treasury would have been admitting that they had lied or were incompetent in stabilizing the financial system — or both."

This podcast from NPR's Fresh Air is also a good overview of the Lehman Brothers bankruptcy and AIG bailout:

http://www.npr.org/templates/story/story.php?storyId=9468642...

There is also a link to a "Our Confusing Economy Explained" which is a good introduction to the financial "weapons of mass destruction".

"So even for people whose own circumstances have not much changed, the cost of the credit is going to rise. For an individual or business that falls behind on payments or needs an increase in short-term credit because of the slowing economy, credit will be much harder to obtain than in recent years.

This is going to slow growth."

Bang. And there's the dirty little secret about our economy that the hard-core capitalists never mention. The theory is that in unfettered capitalism, those who take foolhardy risks are punished. What few mention is that the economy is so interdependent that the foolhardy decisions made by a few ripple through the entire system.

Now we all suffer for the greed and incompetence of a few.

This is why regulation is vital. Business people have shown over and over again that they are just as incompetent and inefficient, if not strikingly more so, than government.

Cooperation, rather than competition, is the higher good.