For the second time this year, The New Yorker has given us a must-read article that's only available online by subscription. Haven't read it? You should subscribe. You also might still find it on shelves. Hell, you can borrow my copy. It's from the Sept. 21st issue, and it's called "Eight Days" by James B. Stewart. All about those eight days last September when the world financial system teetered, creaked, raised dust, but didn't...quite...fall. A lot of good inside information. A lot of good reporting. Key sum-up graph for me, about halfway through (italics mine):

The Treasury official described the situation: "Lehman Brothers begat the Reserve collapse, which begat the money-market run, so the money-market funds wouldn't buy commercial paper. The commercial-paper market was on the brink of destruction. At this point, the banking system stops functioning. You're pulling four trillion out of the private sector"—money-market funds—"and giving it to the government in the form of T-bills. That was commercial paper funding GE, Citigroup, FedEx, all the commercial-paper issuers. This was system risk. Suddenly, you have a global bank holiday."

I'd recommend laissez-faire folks in particular read the piece. You still hear them from time to time—maybe more insisently now that last September is a memory and folks have pitchforks out for bankers and brokers. They should've let Bear collapse. They should've let A.I.G. collapse. Let the market be the market. But letting Lehman Bros. collapse was bad enough. If A.I.G. had collapsed, everything would have collapsed. Is this "bailing out Wall Street"? To an extent. Trouble is we're all connected to Wall Street. We're all connected to institutions we don't know about until they fail. Tim Geithner: "It's not Wall Street that suffers when you 'teach people a lesson.'"

We're definitely at an impasse. The momentum my entire life has been toward merging big companies into bigger companies into behemoths that can compete on a global scale. But then you wind up with a company too big to fail. Last September showed why we can't have that. So something's gotta give.

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