In the second he is now responsible for 5

Henry Paulson, US Treasury Secretary, does not want to expose the taxpayer to the loss of Lehman Brothers. After the acquisition of Bear Stearns by JPMorgan Chase in February to avoid systemic risk in financial markets, then, in early September, placed two mortgage credit supervision agencies, the State has its full sébile. In the first case, he returned to 29 billion of risky assets to facilitate recovery. In the second, he is now responsible for 5.300 products tritrisés billion provided by the agencies and 1,700 billion of debts. This would cost $ 200 billion to the taxpayer. That's enough.

Meeting several times with major Wall Street investment banks patterns this weekend, Timothy Geithner, President of the Federal Reserve of New York, developed them a market in hand. Since the Government refuses to intervene, it is to them that it is a solution that avoids the bankruptcy of Lehman Brothers. Otherwise, it will be like a domino game. The loss of confidence will be such that the other investment banks to crumble and no doubt other financial institutions with them. Merrill Lynch, which is also cluttered tens of billion of "toxic" assets, would no doubt the next on the list.

"Too big to fail".

Only this, whatever the solution that is looming, banks involved want to a consideration of the Government. Either because they already have their balance increased by billions of securitized risk products, because their boards of directors refuse to their own shareholders by intervening in a way that could be the end of the costly and dangerous.

However, Treasury sought to engage iron arm. First because the situation is different from that of Bear Stearns. The Federal Reserve opened since February to investment banks financing window which avoids, a priori, a liquidity crisis. These institutions are also not used for two months. Then, because he fears the sense of impunity that could test the banks if it saved Lehman Brothers in turn.

Ben Bernanke, the Chairman of the Federal Reserve, clearly expressed this concern at the meeting of the Presidents of Central Bank in Jackson Hole, Wyoming, in August. "What would be seen as an implicit extension of the safety net could exacerbate the problem"of too big to fail", finally encouraging additional risk taken, which would further exacerbate the future systemic risk", he said.

The purge is completed

In this extremely tense situation, one of the aggravating factors is that, despite interventions repeated the Government for a year, markets have still not stabilized. Several reasons can explain it. Reserve Federal American created new financing tools to respond to the problems of liquidity, but this has not reduced their risk of insolvency.

Then, the doctrine of the Government stabilize markets and protect shareholders not holders of bonds has the merit of being clear but has negative implications. It particularly helps make access more difficult capital. The release under supervision of Fannie Mae and Freddie Mac, for example, simply flushed their shareholders. What put those who had participated in the spring, and the last fundraising of Fannie Mae, in the amount of $ 5 billion.

Finally, the economic environment is still very difficult. The housing crisis and the credit are are still not addressed and financial institutions have not completed their purge. Moreover, rising unemployment and the slowdown in household consumption bode a deepening economic crisis. All this is that opportunities for labourers for the Government and the main actors in the crisis are limited.