Giving credit to the government for the bailout

Two employees of Christie's auction house maneuver the Lehman Brothers corporate logo on September 24, 2010 in London, England.

We're not that far from the fifth anniversary of the bailout of Bear Stearns; it's March of this year. That means we're also not far from the fifth anniversary of the death of Lehman Brothers, and the whole nightmare that was the end of 2008.

A lot has been written about it, a lot of analysis has been done and a lot of blame has been passed around.

But Alan Blinder -- best known as an economist at Princeton but also a former vice chairman of the Federal Reserve -- says in his new book, "After the Music Stopped," that not enough credit has been given.

"I think the government's taken a lot of blame for how bad the crisis was," Blinder says. "Now, some of it was deserved. That said, history will -- I am confident -- be written, and I'm starting it in this book, by declaring that the stimulus, that the TARP and that the banks' stress tests were enormously successful government interventions that saved us from what could have been a much worse fate."

He thinks the handling of Lehman Brothers was a mistake. "But after that," he says, "the Fed has just done superbly. It's been imaginative and smart. Now, all that said, once you get short-term interest rates down to about zero -- and we've been there since December 2008 -- the Fed starts pulling weaker and weaker weapons out of the armory. And that's where it is now."

About the author

Kai Ryssdal is the host and senior editor of Marketplace, the most widely heard program on business and the economy in the country.


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