Academic

Lehman hoped to sell itself this weekend, but the government wouldn't backstop the deal.  That means liquidation is nigh, filing probably will have occured by the time you read this.  A consortium of banks will provide that backstop, although the Fed will also purchase some of the bank's least sellable assets.  Dealbreaker is a great resource, and has been for a while, on the crisis.

Many will cheer this as the market being allowed to work, and venerable banks going on notice that they aren't too big to fail.  But not, maybe, quite so fast.  The government was all over the cajoling of the consortium of other firms to step up and deal with Lehman's losses.  From an administrative law perspective, this is government action at its least reviewable - no rule is passed, no policy announced, there is just the making of some quiet phone calls.  The fact that Japan's regulatory system often works precisely this way has occasionally driven American trade officials to distraction.  They suspect that Japan actually has a protectionist trade policy, promulgated the way Treasury handled Lehman ... only no one can see it. 

It means that no one will be able to sue the Fed or Treasury over its Lehman policy, but they definitely had one, they just didn't have to announce it or put it through notice and comment.  Congress hasn't authorized the FedNY to step in but the Fed spent the weekend adjudicating Lehman's fate.  I'm not a government in the sunshine maven, and am definitely not a big proponent of suing the government at all times.  And heck, I'm kinda glad that this was the outcome chosen by Treasury.  Maybe, though, this is worth remembering the next time you hear Master of the Universe style paeans to the barracuda-like competitiveness on Wall Street.

Ribstein has more, including on the lack of attention paid to this big, big story by papers run by their Washington bureaus, and noting that Merrill Lynch is about to be sold, and AIG reorganized, all in one amazing weekend.  Those two transactions appear to be pushed by private parties, but, of course, when you buy ML, you get the Fed's discount window too.

Finally, and amusingly, can you profit off Lehman?