redheadguy saidWhy bail out AIG but not Lehmans?
Here's the answer on CNN.com
"Officials opted not to bail out Lehman Brothers, which filed for bankruptcy on Monday. But by Tuesday night, it became clearer that the private sector would not step in to help AIG, which has a greater reach into other financial companies and markets than Lehman does."
The failure of AIG could have caused unprecedented global ripple effects, said Robert Bolton, managing director at Mendon Capital Advisors Corp. AIG is a major player in the market for credit default swaps, which are insurance-like contracts that guarantee against a company defaulting on its debt. Also, it is a huge provider of life insurance, property and casualty insurance and annuities.
"If AIG fails and can't make good on its obligations, forget it," Bolton said. "It's as big a wave as you're going to see." "http://money.cnn.com/2008/09/16/news/companies/AIG/index.htm?cnn=yes
The article also says...
"The company's management will be replaced, though Fed staffers did not name the new executives."
I hope to hell those execs aren't walking away with millions in severance packages!
Why the Govt let Lehman die and rescued Bear Sterns...
"...a Bear Stearns bankruptcy would have prompted a massive sell-off and hit the financial sector much harder than the Lehman bankruptcy did on Monday. The Dow Jones industrial average fell more than 500 points Monday - a very rough day but not as bad as many feared. Seiberg said that steps taken by the Fed to make more money available to Wall Street and banks since March means that "the market doesn't have the same liquidity fears about Lehman failing as it did about Bear."
Barry Ritholtz, CEO of Fusion IQ, said that Bear Stearns' holdings also posed a greater risk to the nation's financial institution than did Lehman's. He said Bear Stearns had $9 trillion worth of financial instruments known as derivatives, much of it shared with other financial institutions such as its eventual buyer, JPMorgan Chase. He said Lehman had about a tenth that much exposure.
"Lehman was only incompetent enough to blow up and destroy themselves, where as Bear's degree of incompetence was enough to threaten the entire financial system," Ritholtz said.
There is also a sense that investors, financial regulators and Wall Street firms have a better handle on the problems in the financial markets than they did six months ago. The fact that Bear Stearns took place when there was so much more uncertainty is also a reason the Fed kept it out of bankruptcy then, but didn't step in to help Lehman now."http://money.cnn.com/2008/09/15/news/companies/why_bear_not_lehman/index.htm?postversion=2008091516