Europe's Debt Crisis & Bear Stearns

David Skeel wrote an insightful and timely editorial in Tuesday's edition of the Wall Street Journal suggesting that European leaders looking for parallels with America's 2008 financial crisis should focus on the Bear Stearns rescue, not the Lehman Holdings failure.

If anything, Skeel may be a bit late with his reminder.

Essentially, he notes that it wasn't Lehman's collapse, per se, which need have roiled US financial markets. Rather, it was Lehman's not being rescued, after Bear Stearns was earlier that year.

Skeel contends, as have others, that Lehman's Dick Fuld proceeded to run his firm into the ground, believing that, at the last moment, the federal government would magically stop the music, pluck Lehman from the jaws of bankruptcy, and arrange a shotgun marriage for it with some other firm.

Instead, federal officials stood by and let Lehman fail.

It wasn't the failure, so much as market concern that the US government had become quixotic and erratic in its financial markets policies, which caused the massive selloff in the wake of Lehman's closure.

Skeel warns Merkel, Sarkozy and their colleagues that the Greek bailout could be a very expensive and dangerous save, only to lead to Spain's, Italy's or some other, much larger country's sovereign debt let to resolve itself without EU help. Skeel points out Sarkozy's self-interest in helping Greece, in order to protect asset values at French banks which hold much Greek debt.

Of course, since this has become a political matter in Euro-land, long term planning is pretty much out the window. It's Greece now, and whichever country follows it to the brink, next.

Consistency in these affairs is what matters, implies Skeel. And a failure to plan ahead will likely lead the Euro zone officials to make the same sorts of mistakes, with similar consequences, as US government officials did when they short-sightedly resolved one crisis at a time, with no longer term plan.