"For the free-marketers, the idea of endless bail-outs was just so obscene that the temptation to walk the walk of market discipline would somewhere, sometime, have proved too great to resist. Lehman did not create the reality of Too Big to Fail, it merely exposed it to general view. There was a brief moment when the general horror at the new state of affairs seemed likely to lead to change; but as stock markets and liquidity have recovered, that moment is receding, and we seem to be settling back into the status quo ante, with a few cosmetic changes about bonuses. It has been a masterful fight-back by the big banks. We the paying public can’t do anything much except admit defeat and settle back for the next set of bills. In the meantime, perhaps we should try and think of a name for the new economic system, which certainly isn’t capitalism: that, remember, is all about ‘creative destruction’, and the freedom to fail. That’s exactly what we don’t have. The most accurate term would probably be ‘bankocracy’."
Fascinating LRB review by John Lanchester of two insider accounts of Lehman Bro's failure last year, of which this is the conclusion. Once TBTF had manifested itself in public in September 2008, it became clear that our economic system had mutated into something beyond the current theoretical underpinnings. Perhaps it needs a new name, Lanchester asks.