Creative Destruction

It looks as though Lehman is filing for bankruptcy tomorrow.

Here is the story of the day from Andrew Sorkin in the NYT.

So it’s a good thing that the fed has chosen not to bail out Lehman, but of course the broader ramifications are frightening. You have of course the deleveraging associated with Lehman potentially selling off its assetts to pay its creditors. What will be the impact on the market? Even if the fed manages to help coordinate a phased deleveraging, since everyone knows the deleveraging is upon us, then the market will price that in immediately, I suspect. If not immediately, then quickly.