Bailout.

As you probably know, Lehman Brothers have filed for Bankruptcy. It would appear that this time the US Government decided not to bail this particular investment bank out.

The federal reserve up until last week was prepared to assist the various financial institutions: In March of this year Bear Sterns had applied for emergency funding, it was then acquired by JP Morgan but not before a sweetener deal to the tune of $30Bn was made available by the federal reserve.

Freddie Mac and Fannie Mae were taken over by the US Government, which between them guarantee about $5.3 trillion (£3 trillion) of mortgages.

So why not the same for Lehman Brothers?

It would seem that the US Government have finally (after Criticism) let the free market take its course.

Members of Congress were among those who objected to the Bear Stearns bail-out, said that by limiting the damage caused by failure, the government was encouraging banks to take greater risks in the future. Last week, after the bail-out of Fannie Mae and Freddie Mac, traders were rushing to the market to take more risks.

It hopes by letting Lehman brothers fail, it is hoped that it will send a message to those involved that there is a price for failure.

In the UK, the Government took over Northern Rock. I objected to this. You may be thinking that I believe in free market economics. I do not. Its the free market that has led us into this crisis.

What I object to is a bank that got so unbelievably greedy, bankrupted itself and then Public money being used to bail it out. The message that the financial sector is saying is:

1. we want less regulation

2. we don’t want any Government interference

3. we have self regulation

4. Oh by the way, can the Government who we don’t want to be regulated by, suspend the principles of free market economics and bail us out when we fuck up, thus we can take greater risks in the future with no “price to pay” and allow those who created this problem to walk away Scot free? With sugar on top?

As long as any Government continues to assist these financial institutions out, then the personnel who operate in them will continue to take these sort of risks, knowing the price of failure is a Government bailout, because ultimately there is no risk to themselves or the organisation they represent.

Let them crash and burn. What we must make absolutely sure of in the future is that the Financial sector is no longer self regulated, but tightly regulated and Governments can exercise control over it when necessary, because its abundantly clear that when it comes to the un-remitting greed that this sector has demonstrated recently, it clearly cannot control itself.