Thriving on Chaos

Tell me
Why'd you have to go and make things so complicated?
--Avril Lavigne

Today's news on Lehman's (LEH) bankruptcy and Merrill's (MER) buyout has many noting lack of direct government involvement in these arrangements. Some suggest that this signals bureaucratic realization that the general credit market situation, rather than being 'too big to fail,' is instead 'too big to bail.'

I wouldn't conclude that. After all, the Fed was in the background today with some monster repos. And it agreed to take on riskier collateral, including stocks, for borrowers at the special alphabet soup of term auction facilities. Parenthetically, this suggests that you and I are now owners of stocks 'purchased' by the government via these trades.

Moreover, I'm guessing that officials have their hands full trying to keep a bomb from exploding courtesy of American International Group (AIG).

There are so many moving parts to our fragile system right now that my sense is that government meddling is merely more difficult to detect.

But the Invisible Hand is surely active.

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