In a surprisingly frank interview, European central bank president Jean-Claude Trichet explains that if Lehman had been saved, the government might not have had the ability to save other major financial institutions in trouble, such as AIG. This view certainly begs the question of how the government decided which company got the short end of the stick.
CNBC: “Was it a mistake to let it [Lehman] fail?”
Mr. Trichet: “Lehman was a trigger, but you could have another trigger. Lehman could have been saved, then AIG wouldn’t have been saved … and even if Lehman and AIG had been saved, then it would be a new entity which would have problems”
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