Should the Government Bail Out Lehman Brothers?

By Joel Persinger
YourRealEstateDude.com

If you’ve been follow the business news, you must be amazed at the number of historic events that have occurred in 2008. Bear Stearns collapsed only to be rescued by the U.S. Government, Countrywide Home Loans was saved by Bank of America, Fannie and Freddie were bailed out by Uncle Sam last week and this past weekend, Lehman Brothers filed for bankruptcy and Merrill Lynch decided to sell out to Bank of America. Wow, what a year!

With what the presidential candidates have both dubbed a “financial crisis” upon us, the news is full of talking heads on every side of the issue. Some say the Government should come to the rescue of Lehman Brothers just as it has for other companies. Others say, “Let the free market system heal itself.” Meanwhile, the stock market is going nuts and the news media is circling the story in a feeding frenzy like so many ravenous sharks smelling blood.

To figure out what should be done to fix this mess, we need only think about what kind of financial system we have in this country. It’s called capitalism. In a free market, capitalistic system companies rise and fall depending upon their financial success or failure. The strong survive and the weak do not. When failing companies collapse, they are absorbed by stronger companies, which often provide the same services in a more effective and successful way then did the failing companies they purchased.

Take Bank of America for example. Obviously, Bank of America is in a better financial position than both Countrywide and Merrill Lynch. Otherwise, how could Bank of America buy the two failed firms? Somehow I suspect that if Bank of America actually ends up with both of these companies, home loans and investment products will still be offered to its customers. Even if nobody rescues Lehman Brothers and it goes down the tubes after 158 years, investors will still be able to invest and homebuyers will still be able to secure a loan. So, what exactly have we lost with the collapse of theses poorly run, failed companies? That’s right… we’ve lost a few poorly run, failed companies. Maybe I’m crazy, but that’s a good thing, isn’t it?

My Grandfather always said, “Joel, if you want to be successful, find out what everyone else is doing and do the opposite.” Grandpa was right. If you want to see the opportunities in today’s marketplace, you must turn away from the idiot box and look at what is positive in the financial world. Remember, the news media does not exist to inform you. It exists to make money, period. It sells more advertising and makes more money by pushing sensational stories. Where do you think the old saying, “If it bleeds, it leads”, came from? I spent 18 years in the broadcasting business. Believe me, I know.

There is a lot of great economic news that you should know about. Here are some examples from today’s news: the price of oil is down under $100 per barrel, investors are putting their money into bonds, mortgage rates are down because investors are buying bonds, home prices are very low, home buyers are buying all over town, the home loan business is picking up and real estate sales are improving.

The economy is not collapsing, the sky is not falling and if Lehman Brothers goes out of business it’s because it should! As tax payers, we should not; we must not continue to bail out poorly run, failing companies. Let the market do what it is meant to do. The strong will survive and the weak will be absorbed by the strong. That is called a free market. That is called capitalism, and it works.