Hope for the best, prepare for the worst. This old saw makes more sense now than ever before and relates to today's headlines. Today's New York Times reports that the City of New York has a disaster manual -- a set of instructions for what the courts can and cannot do in event of an emergency. It's pretty grim stuff -- who gets care when there are more patients than medicine -- but after the events of 9/11 and other disasters on far away shores we need to have these plans in place.
Having a good imagination of bad times is prudent. Just ask Ben Bernanke.
The Federal Reserve Chairman had a long interview with the Federal Finance Inquiry Commission -- the transcript is a whopping 87 pages -- and the chairman minced no words on the 2008 financial meltdown.
Even with the benefit of 20-20 hindsight, Bernanke claims that the US government did everything it could to save the now-departed Lehman Brothers. "I will maintain to my deathbed, that we made every effort to save Lehman," he tells Bloomberg. "but we were just unable to do so because of a lack of legal authority."
And speaking of imagination, Bernanke has strong advice for regulators who must deal with the next financial catastrophe. In short, we have to imagine the very worst: The disintegration of the largest and wealthiest financial firm on the planet.
Bernanke said an overhaul of financial regulation being debated by Congress at the time "will be a failure if we could not contemplate the failure" of a firm such as Goldman Sachs Group Inc.
"That is, there needs to be a system by which Goldman Sachs will go bankrupt and Goldman Sachs' creditors could lose money," the Fed chief said, in a reference to the securities firm that was the most profitable in Wall Street history before it converted to a bank in 2008.
On a side note, it would be nice to read Bernanke's interview but it will be sealed in the National Archives and not made available for the next five years. I wonder what else is inside the rest of the transcript.
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio