Andrew Ross Sorkin shows his range of thought goes from one 40 yard line to the other when he contemplates a world where the government decided to rescue Lehman rather than allow it to fail. He considers various bailout scenarios, all of which leave the welfare dependents on Wall Street intact.

There was an alternative. It was possible to allow the market to work its magic, which would have certainly destroyed the other three remaining independent investment banks (Goldman Sachs, Morgan Stanley, and Merrill Lynch). Two of the megabanks, Citigroup and Bank of America, which were on life support at the time, surely would have failed as well. It is possible that the other two megabanks, J.P. Morgan and Wells Fargo, also would have been dragged down as well.

In this world, we would have quickly eliminated much of the waste that has developed over the decades in a coddled financial sector that uses its political power to get hundreds of billions of dollars of implicit and explicit subsidies from the government. The economy would have taken a big hit, but those of us old enough to remember 2008 recall that the economy did take a big hit even with the bailouts. 

It would have been necessary to have major stimulus to reboot the economy, but spending money is a political problem, not an economic one. (Most of us know how to spend money.) It is certainly plausible that serious stimulus would have been easier with the Wall Street gang put out on the street, dodging law suits and indictments, rather than advising President Obama.

Unfortunately, Andrew Ross Sorkin can't even think of such possibilities.

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