Fed Attempts To Save Goldman Sachs & Morgan Stanley

Unlike Paulson's move, which is the lone move I don't agree with in this crisis, I see this as having potential upside for the American economy. Although it surely is an example of the government picking winners and losers in the market place. And, specifically, it is the Federal Reserve deciding who receives monopoly access to capital in this country. But, then as we wrote some time ago, access to capital is far from a free market activity in the U.S. It is a monopoly or cartel. Pick your wording. If foreign banks, global businesses and individuals had access to the same capital that Wall Street does, the world would be a substantially better place for a substantially larger number of people. And, it would go a long way to prevent these types of disasters in the future. But, that likely is not going to happen any time soon.

Morgan and Goldman were very likely headed for the scrap heap before this plan. Relatively substantiated stories last week had Morgan's CEO saying they weren't going to survive without a partner and both company's business models are broken. This move will help these organizations deal with the unfolding economic environment and potentially transform themselves into sustainable entities. The key word is potentially. In other words, it gives them a fighting chance to survive.

Update: The latest Bloomberg article on the Goldman & Morgan bailouts.