War and Covid - The excuse for the coming financial collapse

[bilby]

If there’s too much cash in the system, a large part of the blame lies with the people who stopped taking so much cash out of the system in taxes.

Taxes don't take cash out of the system because the government spends the tax money.

(Federal) taxation is the destruction of money.

(Federal) government spending is the creation of money.

Currency issuing governments do NOT spend tax receipts; Rather, they tax back some of the money they spent into existence.

This is the biggest difference between a currency issuer and a currency user. Issuers must spend first, in order to have something to tax; Users must earn or borrow first, in order to have something to spend.

The US Federal Government does not, and never has, spent tax receipts. The taxes you send to the IRS are functionally indistinguishable from banknotes shovelled into an incinerator, and the sole purpose of the action of collecting those taxes is to remove money from the economy, so that government spending (which can be done regardless of taxation) doesn’t cause unreasonable levels of inflation.

 

[Swammerdami]

A lengthy exercise in hand waving and obfuscation.

Money is 'the coin of the realm'. Drachmas, pesos, dollars, rubles.

Checks are not cash. Traveler's Checks are not cash. Credit cads are not cash. Debit cards are not cash.

This is all completely wrong. If you have $1000 in a checking account, is that "money"? I led you by the hand, step by step, showing how money was created by private banks. Where did you get confused? For several decades when ALL U.S. paper money was printed by private banks, do you think the ONLY "money" in the U.S. was the coins minted by the U.S.? Is there a way we can BET on whose understanding is correct?

On some topics the intellectual caliber of this Board is excellent: linguistics, history, anthropology, etc. There are several excellent poets here. I'll guess there are at least a few Infidels who are competent in economics and finance and are certain that my explanation is correct. I'm not sure why they're not chiming in to help bring cloture to this subthread.

 

[bilby]

A lengthy exercise in hand waving and obfuscation.

Money is 'the coin of the realm'. Drachmas, pesos, dollars, rubles.

Checks are not cash. Traveler's Checks are not cash. Credit cads are not cash. Debit cards are not cash.

A common scene in old movies. Somebody owes another guy money. He says to the guy 'I'll give you a check for what I owe you'. The other guy says 'I don't trust you, give me cash'.

Cash isn't what it once was as in the 'old movies' before 1971. Before that date, someone could take their paper money into a federal reserve bank, demand, and receive silver for it. Paper money has only been an IOU that the federal reserve is not required to redeem since 1971. It only has value because others accept it as having value... sorta like the personal check the guy in your post wanted to pay with.

I haven’t handled notes or coins in several years. Literally every single cent I earn, and every single cent I spend, is electronic records.

Cash is dead to me. I still earn money, and still spend money. But cash is as much a part of my life as Dodos and Passenger Pigeons.

Money and cash have very little relationship in modern economies; Cash is just the minuscule fraction of money that people have as physical tokens - it has a tiny number of minor uses, mostly in the ever decreasing number of situations where electronic transfer of wealth is impossible or impractical; and a lot of problems, not least of which is a lack of security.

So far so good. But how will you feed yourself when the internet is attacked by Russia/China or blown up by an electromagnetic bomb? IMHO its only a matter of when this happens.

You will either starve, resort to stealing, or borrow from someone smarter than you are having real physical money that food producers will exchange.

In the event of such a massive disaster, having money would make little difference.

You can’t eat dollars, and you can’t exchange them for food at an empty supermarket.

If civilisation collapses, billions will die.

Fortunately, that’s not likely to happen. Are you taking steps to protect yourself from being hit by a meteorite? It’s a risk in the same order of likelihood as the destruction of electronic banking.

I am always amazed at the level of paranoia demonstrated by Americans. Europeans aren’t that paranoid, despite (perhaps because of) the fact that they have actually seen real disasters.

Or is it a wish fulfilment fantasy of the libertarian gun-toting survivalist who wants so desperately to be able to say “I told you so”, but hasn’t thought things through at all? Do you really think that dollar bills would be useful for anything other than toilet paper in the scenarios you outlined?

 

[Swammerdami]

Again: Government raises money via taxes or borrowing. Taxes do not increase the money supply, but they transfer money from the private sector to the public. (It then gets back in private hands when government pays its workers, pays its munition manufacturers, or mails Covid stimulus checks.)

Borrowing DOES increase the money supply when the government bills, notes or bonds end up belonging to a U.S. bank, private or central. At present the Federal Reserve banks own about $6 trillion of Treasury debt (and another $3 trillion in other debt, especially mortgage-backed securities). As recently as 2019 the Fed had only $2.5 trillion of Treasury debt, so "QE" has been progressing rapidly just in a few years. (What would interest rates be without this huge "demand" for such debt?)

If there’s too much cash in the system, a large part of the blame lies with the people who stopped taking so much cash out of the system in taxes.

Taxes don't take cash out of the system because the government spends the tax money.

Bilby is correct, at least given present-day central bank realities. Government borrowing is INCREASING the money supply (possibly "too much"). Taxes do not.

 

[bilby]

A lengthy exercise in hand waving and obfuscation.

Money is 'the coin of the realm'. Drachmas, pesos, dollars, rubles.

Checks are not cash. Traveler's Checks are not cash. Credit cads are not cash. Debit cards are not cash.

A common scene in old movies. Somebody owes another guy money. He says to the guy 'I'll give you a check for what I owe you'. The other guy says 'I don't trust you, give me cash'.

Cash isn't what it once was as in the 'old movies' before 1971. Before that date, someone could take their paper money into a federal reserve bank, demand, and receive silver for it. Paper money has only been an IOU that the federal reserve is not required to redeem since 1971. It only has value because others accept it as having value... sorta like the personal check the guy in your post wanted to pay with.

I haven’t handled notes or coins in several years. Literally every single cent I earn, and every single cent I spend, is electronic records.

Cash is dead to me. I still earn money, and still spend money. But cash is as much a part of my life as Dodos and Passenger Pigeons.

Money and cash have very little relationship in modern economies; Cash is just the minuscule fraction of money that people have as physical tokens - it has a tiny number of minor uses, mostly in the ever decreasing number of situations where electronic transfer of wealth is impossible or impractical; and a lot of problems, not least of which is a lack of security.

So far so good. But how will you feed yourself when the internet is attacked by Russia/China or blown up by an electromagnetic bomb? IMHO its only a matter of when this happens.

You will either starve, resort to stealing, or borrow from someone smarter than you are having real physical money that food producers will exchange.

In the event of such a massive disaster, having money would make little difference.

You can’t eat dollars, and you can’t exchange them for food at an empty supermarket.

If civilisation collapses, billions will die.

Fortunately, that’s not likely to happen. Are you taking steps to protect yourself from being hit by a meteorite? It’s a risk in the same order of likelihood as the destruction of electronic banking.

I am always amazed at the level of paranoia demonstrated by Americans. Europeans aren’t that paranoid, despite (perhaps because of) the fact that they have actually seen real disasters.

Or is it a wish fulfilment fantasy of the libertarian gun-toting survivalist who wants so desperately to be able to say “I told you so”, but hasn’t thought things through at all? Do you really think that dollar bills would be useful for anything other than toilet paper in the scenarios you outlined?

To add to this, I sincerely doubt that many people have enough cash on hand to make a difference, even if it didn’t become worthless in some cataclysm.

I typically have a fair amount of food at home, because we buy in bulk whatever is cheap. That’s a useful hedge against short term problems in getting things from the shops.

If a cataclysmic disaster wiped out electronic spending options, but left my bank account untouched, there would be nothing to stop me from goto the local bank branch and drawing out some cash.

If, as seems more likely, the disaster wipes the bank’s computers, then nobody can withdraw cash, any more than they could swipe a credit card or use Apple Pay.

So then it comes down to how much cash you keep in your wallet, or in your home. I am guessing that the answer is ‘not much’, for the vast majority of sane people.

Keeping your money in a bank is smart. It’s also indistinguishable from using electronic money - you don’t imagine that the bank has a stack of bills in a box with your name on it, do you? A modern bank has no record of accounts and balances, other than on its computers.

There’s about $7 Trillion in notes and coins worldwide, in all currencies.

‘Narrow money’ - that $7 Trillion, plus money in easily accessible bank accounts (checking or current accounts), totals around $37 Trillion.

‘Broad money’ - that $37 Trillion, plus savings accounts, fixed term deposits, stock trading accounts etc. totals around $90 Trillion.

So there’s at least five times the ‘narrow’ money as there is bills and coins; The vast majority of which is electronic.

Notes and coins are a trivial afterthought to the world’s money supply - and are concentrated in the Third World, so they’re even more trivial in major economic powers, such as the USA.

Cash is dead. It’s just not quite stopped kicking yet.

 

[Canard DuJour]

If there’s too much cash in the system, a large part of the blame lies with the people who stopped taking so much cash out of the system in taxes.

Taxes don't take cash out of the system because the government spends the tax money.

(Federal) taxation is the destruction of money.

(Federal) government spending is the creation of money.

Currency issuing governments do NOT spend tax receipts; Rather, they tax back some of the money they spent into existence.

This is the biggest difference between a currency issuer and a currency user. Issuers must spend first, in order to have something to tax; Users must earn or borrow first, in order to have something to spend.

The US Federal Government does not, and never has, spent tax receipts. The taxes you send to the IRS are functionally indistinguishable from banknotes shovelled into an incinerator, and the sole purpose of the action of collecting those taxes is to remove money from the economy, so that government spending (which can be done regardless of taxation) doesn’t cause unreasonable levels of inflation.

Indeed.

Apropos of which, here's an informative paper about the UK case:

The self-financing state: An institutional analysis of government expenditure, revenue collection and debt issuance operations in the United Kingdom


New Statesman article by the authors.


TLDR snIppets:

"How does UK government spending work?

All state spending and revenue collection is ultimately initiated though a body, founded in 1787, known as the “Consolidated Fund”. The government has a special account at the Bank of England which can be understood as an overdraft of the Consolidated Fund with no limits and no interest. When the government “spends”, this account is debited and the same amount of new money is credited to government departments by the Bank of England, appearing in their commercial bank accounts as new deposits. The Consolidated Fund account starts every day with a balance of zero, meaning no pre-existing money, raised through taxation or borrowing, is used when the government spends.

Rather than a household, it is more accurate to think of the state as an all-powerful monetary institution. It creates money in a similar way to modern commercial banks. When you request a loan, the bank converts your IOU to the bank into liabilities upon itself that appear as newly created deposits that you can spend. Indeed, all money, including state money, is in essence a relationship of credit and debt.

The crucial difference is that while a commercial bank has a choice about whether to grant you a loan, the Bank of England has no such freedom: it is required to credit government accounts whenever parliament activates spending and increases its IOUs in the Consolidated Fund. This is mandated in a law that goes back to 1866. Parliament’s money-creating power is thus sovereign.

(...)

The findings of our paper should – in a rational world – end the state-household analogy. The mechanics of the UK spending process demonstrate, beyond doubt, that government spending is not dependent on raising taxes or its ability to borrow on financial markets."

 

[Loren Pechtel]

If there’s too much cash in the system, a large part of the blame lies with the people who stopped taking so much cash out of the system in taxes.

Taxes don't take cash out of the system because the government spends the tax money.

(Federal) taxation is the destruction of money.

(Federal) government spending is the creation of money.

Currency issuing governments do NOT spend tax receipts; Rather, they tax back some of the money they spent into existence.

This is the biggest difference between a currency issuer and a currency user. Issuers must spend first, in order to have something to tax; Users must earn or borrow first, in order to have something to spend.

The US Federal Government does not, and never has, spent tax receipts. The taxes you send to the IRS are functionally indistinguishable from banknotes shovelled into an incinerator, and the sole purpose of the action of collecting those taxes is to remove money from the economy, so that government spending (which can be done regardless of taxation) doesn’t cause unreasonable levels of inflation.

The currency creation is handled by the Federal Reserve, deliberately kept semi-autonomous from the government.

 

[steve_bank]

Again: Government raises money via taxes or borrowing. Taxes do not increase the money supply, but they transfer money from the private sector to the public. (It then gets back in private hands when government pays its workers, pays its munition manufacturers, or mails Covid stimulus checks.)

Borrowing DOES increase the money supply when the government bills, notes or bonds end up belonging to a U.S. bank, private or central. At present the Federal Reserve banks own about $6 trillion of Treasury debt (and another $3 trillion in other debt, especially mortgage-backed securities). As recently as 2019 the Fed had only $2.5 trillion of Treasury debt, so "QE" has been progressing rapidly just in a few years. (What would interest rates be without this huge "demand" for such debt?)

If there’s too much cash in the system, a large part of the blame lies with the people who stopped taking so much cash out of the system in taxes.

Taxes don't take cash out of the system because the government spends the tax money.

Bilby is correct, at least given present-day central bank realities. Government borrowing is INCREASING the money supply (possibly "too much"). Taxes do not.

You still have not read the lins. As Loren pointed out the Fed is semi-autonomous by design. To increase spending above revenue the government has to borrow money and make payments just like a car loan. The Fed is the central bank. All governments actually have credit ratings just like an individual r a business. A government's credit rating affects the abilty to borrow money and how much inerest it has to pay.

Say you have 1 million dollars in a bank account Banks are required to keep a minimum percentage of all deposits on hand. You ask for your 1 million dollars in cash and the bank does not have it on hand. Where does your bank go to get a million dollars in real paper cash?

 

[bilby]

If there’s too much cash in the system, a large part of the blame lies with the people who stopped taking so much cash out of the system in taxes.

Taxes don't take cash out of the system because the government spends the tax money.

(Federal) taxation is the destruction of money.

(Federal) government spending is the creation of money.

Currency issuing governments do NOT spend tax receipts; Rather, they tax back some of the money they spent into existence.

This is the biggest difference between a currency issuer and a currency user. Issuers must spend first, in order to have something to tax; Users must earn or borrow first, in order to have something to spend.

The US Federal Government does not, and never has, spent tax receipts. The taxes you send to the IRS are functionally indistinguishable from banknotes shovelled into an incinerator, and the sole purpose of the action of collecting those taxes is to remove money from the economy, so that government spending (which can be done regardless of taxation) doesn’t cause unreasonable levels of inflation.

The currency creation is handled by the Federal Reserve, deliberately kept semi-autonomous from the government.

Sure.

You do understand that that has exactly zero relevance to my point, and does nothing to rescue your false claim, right?

Taxes don't take cash out of the system because the government spends the tax money.

No, the government has the Federal reserve create the money it spends.

Taxes are simply money being destroyed, and are required to remove the excess money created in this way, which would otherwise be inflationary.

The order of operations here is important. Money is created, then spent, then recovered as tax, and then destroyed.

Taxes are the end, not the beginning, of federal government spending. This being the exact opposite of the situation for non-currency issuing entities, such as households, state governments, city governments, businesses, etc., etc., for whom it is necessary to first obtain money (by earnings, taxes, or loans, for example), before it is possible for them to spend any.

 

[bilby]

real paper cash

WTF is ‘real’ about paper cash??

 

[Harry Bosch]

real paper cash

WTF is ‘real’ about paper cash??

I'm not an economist. So I'll probably butcher this. But the US dollar is supported the US government. The government essentially promises that the dollar is worth what it says it is. It has tools that pump up the dollar if it is falling value more than it wants it to. As a contrast, there is nothing supporting or standing by crypto. It could drop to nothing, and no country will come to its defense.

 

[Canard DuJour]

The Fed, like most central banks, has day-to-day autonomy in monetary policy (interest rate setting) but cannot veto the fiscal operations of govt. The govt, whether in deficit or surplus, spends by instructing the Fed to mark up commercial bank reserve balances with keystrokes.

That is, instruction, not request. And keystrokes, not cash.


"There is nothing to prevent the federal government from creating as much money as it wants and paying it to someone.” - Alan Greenspan, (then) Federal Reserve Chairman.

 

[Swammerdami]

The Fed, like most central banks, has day-to-day autonomy in monetary policy (interest rate setting) but cannot veto the fiscal operations of govt. The govt, whether in deficit or surplus, spends by instructing the Fed to mark up commercial bank reserve balances with keystrokes.

That is, instruction, not request. And keystrokes, not cash.

Hunh? The Treasury can write checks (or push buttons on its smartphone I suppose ) but cannot overdraw its account at the Fed. When its balance goes to zero, the Treasury must replenish its account by auctioning off new debt paper. (AFAIK, the Fed never bids on such newly issued debt, but that matters little since the Fed actively trades Treasury debt in the secondary market.

And of course "keystroke" money is just as real as paper Benjamins.

"There is nothing to prevent the federal government from creating as much money as it wants and paying it to someone.” - Alan Greenspan, (then) Federal Reserve Chairman.

This was said in 2005 in the context of Paul Ryan's "concern" that SocSec might become insolvent.. Greenspan didn't say HOW the U.S.G. would create the money: in fact it would do it by selling debt paper.

 

[bilby]

real paper cash

WTF is ‘real’ about paper cash??

I'm not an economist. So I'll probably butcher this. But the US dollar is supported the US government. The government essentially promises that the dollar is worth what it says it is. It has tools that pump up the dollar if it is falling value more than it wants it to. As a contrast, there is nothing supporting or standing by crypto. It could drop to nothing, and no country will come to its defense.

Sure. But that’s the US Dollar. A good four fifths of which, by even the narrowest definition of ‘money’, doesn’t exist as notes and coins.

My question is about paper cash, which Steve seems to think is somehow more ‘real’ than all the other forms of money in the economy. He was explicitly differentiating between money on deposit at a bank and ‘real paper cash’.

 

[Jimmy Higgins]

Bitcoin is a failure for a currency. Can you imagine waking up and finding out your money is worth 40% less than what it was the day before? And would you spend it today if it could be worth 25% more tomorrow? That isn't how currencies function in a proper fashion.

And yes, gold and silver, open to manipulation just the same, and suffer from the ills of being a commodity.

So these are solutions that either could never work or didn't work well when they were used originally.

Bitcoin was never meant to be a currency it was meant to be a store of wealth that could not be stolen by any government. As such I would say it does appears to be failing although it is probably too early to know for sure. It is still in its infancy.

Really? That isn't what this guy said.

Anyway, the reasoning is that when enough rational people decide to use money that can not be manipulated by special interests, they will. And that there will be nothing any government can do to prevent it. At some point there will be so many on board bitcoin will no longer be volatile becoming a defacto currency for the world.

Or this guy stated.

The general premise of bitcoin is correct but what most are forgetting is that any government can and will outlaw a blockchain currency if they consider it a threat.

 

[Canard DuJour]

The Fed, like most central banks, has day-to-day autonomy in monetary policy (interest rate setting) but cannot veto the fiscal operations of govt. The govt, whether in deficit or surplus, spends by instructing the Fed to mark up commercial bank reserve balances with keystrokes.

That is, instruction, not request. And keystrokes, not cash.

Hunh? The Treasury can write checks (or push buttons on its smartphone I suppose ) but cannot overdraw its account at the Fed. When its balance goes to zero, the Treasury must replenish its account by auctioning off new debt paper.

Then it can - and almost always does - "overdraw its account at the Fed". Treasury is indeed then obligated to issue bonds, but by its own fiscal rules, not because the Fed is authorised to say "payment declined". Those bonds aren't some negative form of money, but an interest-bearing form of money - the holder's asset, not liability. Thus when the govt deficit-spends, net private sector financial assets increase:

As bilby points out above, the order of operation is crucial. When the federal govt deficit-spends, it doesn't rob Peter to pay Paul. Paul gets new dollars then Peter voluntarily swaps regular dollars for new interest-bearing dollars.

(AFAIK, the Fed never bids on such newly issued debt, but that matters little since the Fed actively trades Treasury debt in the secondary market.

And of course "keystroke" money is just as real as paper Benjamins.

Of course.

"There is nothing to prevent the federal government from creating as much money as it wants and paying it to someone.” - Alan Greenspan, (then) Federal Reserve Chairman.

This was said in 2005 in the context of Paul Ryan's "concern" that SocSec might become insolvent.. Greenspan didn't say HOW the Fed would create the money: in fact it would do it by selling debt paper.

OK.

 

[Swammerdami]

The Fed, like most central banks, has day-to-day autonomy in monetary policy (interest rate setting) but cannot veto the fiscal operations of govt. The govt, whether in deficit or surplus, spends by instructing the Fed to mark up commercial bank reserve balances with keystrokes.

That is, instruction, not request. And keystrokes, not cash.

Hunh? The Treasury can write checks (or push buttons on its smartphone I suppose ) but cannot overdraw its account at the Fed. When its balance goes to zero, the Treasury must replenish its account by auctioning off new debt paper.

Then it can - and almost always does - "overdraw its account at the Fed". Treasury is indeed then obligated to issue bonds, but by its own fiscal rules, not because the Fed is authorised to say "payment declined". Those bonds aren't some negative form of money, but an interest-bearing form of money - the holder's asset, not liability.

What exactly are we quibbling over? The detailed mechanics I assume, since the principles of government finance and money creation were given upthread. Various government agencies have checking accounts at Treasury and Treasury itself has accounts at the FRB. Any "overdraft" in these accounts would be very short-lived. I wasn't aware that they had any overdraft protection — and would like to see a cite that overdrafts occur — but it would have no effect on the principles we're discussing.

Your "and almost always does - overdraw its account at the Fed" is almost certainly wrong, Are your alleged "overdrafts" subject to the statutory debt ceiling?

 

[steve_bank]

Bitcoin was never meant to be a currency it was meant to be a store of wealth that could not be stolen by any government. As such I would say it does appears to be failing although it is probably too early to know for sure. It is still in its infancy.

A main selling point for crypto currency was transparency and traceability of transactions. If you were subject to fraud and you lost money the money trail would be evident.

Theoretically it would cripple the ability to launder crimnal money. Transactions stored in multiple locations.

It turns out crypto money laundering and fraud is common.

At least in the west the theat of government 'stealing' private money never existed in modern times as far as I know. There has been fraud , embezzlement and other financial crimes by politicians and government workers.

 

[steve_bank]

I don't think that anyone in government can get a checking account or credit-debit card from the Fed or treasury.

The Fed is set up as the top bank for all commercial banks. The primary lender.

 

[Swammerdami]

I spent some time preparing a post expounding on further details of U.S. government banking and money, but it would be off-topic. Anyway, some of you seem to think I don't even know what I'm writing about!

But I will add some brief comments.

I don't think that anyone in government can get a checking account or credit-debit card from the Fed or treasury.

It is routine for federal agencies to have checking accounts at Treasury Operations. Do vendors and other entities have accounts? I don't know. Checking accounts at FedRes Banks are almost exclusively for banks — these are major clearinghouses, indeed FRB-NY is clearinghouse for the world.

The Fed is set up as the top bank for all commercial banks. The primary lender.

And all U.S. banks which are not regulated by a state must be members of the Federal Reserve. They are obligated to buy shares in a FedRes bank which is set up on paper like a private bank, though that construct is usually treated as fantasy. The member banks are paid 6% dividends on their shares, elect the Governor and so on. (A majority of each of the two FRB policy-making bodies are appointed by POTUS rather than elected by member banks.)

The FedRes can be called "the primary lender" but it avoids the routine loans used by some banks to adhere to their required fractional reserves. These overnight loans are expected to be made between private banks, with FRB just suggesting a target interest rate.

Emergency loans to provide liquidity are a different matter. The 2008 crisis was interesting. Consultations to estimate the solvency of troubled banks were more important than the actual mechanics of injecting money. But FRB is prohibited by law from making loans which are not financially sound.

So in March 2008 the big question was the solvency of Bear Stearns. This is complicated: A company which cannot meet its near-term obligations may be technically insolvent, even if its assets exceed liabilities. And the process of settling accounts or reorganizing can easily turn a solvent company insolvent.

Anyway, the chiefs of FRB and Treasury decided Bear Stearns was probably solvent and organized a bailout. Jamie Dimon's JPMorganChase would acquire Bear Stearns, with the FRB acquiring $30 billion of the most toxic assets and lending about $15 billion to JPM in a sweetheart "don't need to repay if this backfires" deal. Since JPM and BS were merged, it's not clear if the deal was profitable for JPM (Jamie Dimon says he regrets the deal). One of JPM's biggest expenses was the huge lawyers' tab run up in resultant litigation.

The old stockholders were originally to get just 2 cents on the dollar, but a lawsuit upped that to 11 cents:

On March 24, 2008, a class action was filed on behalf of shareholders . . . The revised deal was aimed to quiet upset investors and was necessitated by what was characterized as loophole in a guarantee that was open ended, despite the fact that the deal required shareholder approval. While it was not clear if JPMorgan's lawyers . . . were to blame for the mistake in the hastily written contract, JPMorgan's CEO, Jamie Dimon, was described as being “apoplectic" about the mistake. The Bear Stearns bailout was seen as an extreme-case scenario, and continues to raise significant questions about Fed intervention. On April 8, 2008, Paul A. Volcker stated that the Fed has taken 'actions that extend to the very edge of its lawful and implied powers.' . . . On May 29, Bear Stearns shareholders approved the sale to JPMorgan Chase at the $10-per-share price.

An article by journalist Matt Taibbi for Rolling Stone contended that naked short selling had a role in the demise of both Bear Stearns and Lehman Brothers

Six months later, Lehman went belly-up. It was bigger than, and more insolvent than, Bear Stearns. (At one point it had almost a Trillion dollars due in an overnight money market.) Given the reddened "very edge of [FRB's] lawful and implied power" quote above, the decision to just let bankruptcy courts handle Lehman — whatever the cost to the financial system — may have been automatic.