Timbe-e-e-e-r! Wall Street is in Crisis Over Fears that Lehman Brothers Crash Will Trigger More Chaos

World financial markets hold their breath as another giant U.S. investment bank teeters on the brink of collapse

From this morning's Times Online story:

This weekend, Lehman’s head is on the block as meetings over its future continue. Will Paulson go to Washington on Tuesday having successfully whipped the banking industry into resolving this crisis? Will he have blinked and put government money in after all? Or will Lehman have simply collapsed, with untold knock-on effects to the banking system? Paulson has been so active on Wall Street recently that “Breakfast at Hank’s” has become bankers’ shorthand for a crisis meeting. In Lehman Brothers, he has a problem that cannot easily be resolved over muffins and coffee.

More choice commentary from one of Weber County Forum's favorite economic commentators, Professor Roubini:

Nouriel Roubini, professor of economics at the Stern School of Business and chairman of RGE Monitor, said Washington’s previously “fanatically laissez faire” attitude had precipitated this crisis and forced regulators to perform a humiliating about face to become “the United Socialist State Republic of America.” But this was “socialism for the rich” where profits were privatised but debts were picked up by the taxpayer.
Roubini said lax regulation had led to the current problems and now that the government’s coffers had been opened, officials will have a hard time closing them.
“Many of the companies not in financial services are going to say the banks are being bailed out, why shouldn’t we?” he said. The car industry is already looking for $50 billion in subsidies. The troubled airline industry may be next.
Paulson has talked of the “moral hazard” of government bailouts – a situation where companies act carelessly because they know the government will pick up the pieces. It’s a debate Roubini said American regulators should have been having years ago during the excesses of the boom years.
“In principle Lehman should be allowed to go,” said Roubini. “But if that happens the next day there will be a run on Merrill Lynch, Goldman Sachs. Let’s not pretend that’s not going to happen. The systemic risk is worse now than it was with Bear Stearns. It’s pretty pathetic really. They are running out of ideas.”

Just a little more chirpy economic news for this otherwise dazzling Emerald City Sunday morning.

Have a nice day, everyone.