Bill Clinton says Bush was wrong to let Lehman fail
Former President Bill Clinton says the Bush administration made a mistake allowing Lehman Bros. to fail -- and that the calamity that resulted from Lehman’s collapse heavily tilted the presidential election in Barack Obama’s favor.
Speaking at the World Business Forum in New York on Wednesday, here’s what Clinton said about Lehman, as relayed by the Wall Street Journal:
"I feel more strongly now it was wrong. . . . They decided not to facilitate a loan to Lehman Bros. They thought Lehman Bros. was so much smaller than AIG or Bear Stearns, they could afford to let it fail. The problem is that Lehman Bros. had already paid. When they failed, all the rest of us paid. It led to a collapse of the stock market. Every bank in America that had mortgage investments it hadn’t sold off looked like it had bad loans."
Clinton has events out of sequence. The American International Group rescue came after Lehman’s bankruptcy on Sept. 15.
More important, I don’t know what evidence Clinton has that the Bush administration thought it could "afford" a Lehman collapse. It’s more probable that the White House, the Treasury and the Federal Reserve just had no idea that the credit markets would immediately go into a deep freeze. If they could have seen the future, I doubt that then-Treasury Secretary Henry M. Paulson and Federal Chairman Ben S. Bernanke would have closed the casket lid on Lehman.
Clinton also suggests that Lehman’s fall all but assured Arizona Sen. John McCain’s defeat in the November election.
"In 2008, we held our presidential election on Sept. 15," Clinton said. "When the Bush administration decided not to help Lehman Bros. . . . McCain’s chances of winning an election went from 1-in-4 to 1-in-50. The election ended Sept. 15."
For sure, the plummeting economy last fall helped to seal the deal for the Democrats. But would a rescue of Lehman Bros. have had made voters any more friendly toward Republicans at that point -- particularly if the rescues of AIG and the entire banking system (via TARP) probably would have followed regardless?
-- Tom Petruno
Photo: Former President Bill Clinton. Credit: Kevork Djansezian / Getty Images