a private sector version of maiden lane llc, the vehicle used to acquire the assets from bear stearns. the banks would have lent $ 30 billion to their spv, and the special purpose vehicle ( spv ) would have purchased largely real estate - related assets from lehman. this would have made lehman more attractive to a potential acquirer. lining up financing for the illiquid assets was a necessary condition for a rescue, but it was not sufficient. the sine qua non of the plan, as secretary geithner and others have pointed out, was a willing and capable merger partner. 5 in the end, the rescue failed because we had no willing and capable merger partner able to provide the necessary commitments to stabilize lehman. and, lest there is confusion on the point, this would be true no matter who was financing the acquisition of lehman ’ s illiquid assets, the counterparties or the new york fed. as of that friday, there were two prospective lehman acquirers : bank of america and barclays. on saturday, september 13, bank of america abandoned the potential acquisition of lehman and reached an agreement to acquire merrill lynch. barclays was the only remaining suitor. on sunday, september 14, with the consortium financing committed, we learned for the first time that barclays would not be able to deliver a key document to carry the merger to conclusion : a guarantee of lehman ’ s trading obligations between the signing of the merger agreement and its closing. the bear stearns transaction taught us the importance of the guarantee to a successful rescue. a guarantee maintains the ability of the troubled company to operate as a going concern and, thus, preserves value. it does this by providing protection to counterparties during an especially vulnerable period – the period between merger contract and merger closing. without such a guarantee, the creditors and counterparties of the firm would be at risk in the event that the merger fell apart because of a failed shareholder vote or some other contingency. consequently, as a market matter, the guarantee is an indispensable part of any such rescue operation. on sunday, september 14, we learned that barclays could not proffer the needed guarantee without a shareholder vote. this vote would take days, if not weeks or months, and there was no way to predict if the shareholders would even vote for the transaction to proceed. i explored with counsel whether the u. k. government, or one of its instrumentalities like the fsa, might waive this u

systems, with a strong concentration of their assets in particular industries, have also been important elements in most financial crises that have followed on from a financial bubble. a high central government debt and high inflation from the start have also reduced the possibilities for stimulating the economy. the optimism that pushed up share prices and growth during the previous economic boom was largely based on expectations that information technology would increase production capacity in the economy. the over - optimism that arose was broken when companies could not demonstrate the profit levels that were expected, but no economic - policy game rules were changed. although there have been many overstatements in the discussion of the importance of it developments, i believe that it has the potential to increase the level of productivity in the economy. computers and the internet make gathering information simple, cheap and quick, as well as enabling contacts between buyers and sellers on almost all levels. information technology should, for instance, reduce the cost of financing, handling inventories and procurement. it can have contributed to the fairly rapid return in households ’ and companies ’ confidence in the economy. another reason why the slowdown in the economy appears to be short - lived is the stimulation contributed by both monetary policy and fiscal policy. low inflation and stable inflation expectations when the downward turn came meant that there was scope to lower interest rates in most countries. in addition, the central government debt had been reduced in most countries, which meant that fiscal policy could also be used to stimulate the economy. it is possible that a further reason why the turbulence on the financial markets did not have such a large effect on the real economy was the development of risk management instruments and systems in the financial markets. most of the earlier financial crises have been preceded by a large rise in property prices, at the same time as the banks have been strongly exposed to this sector. this time, it was the it and telecommunications sector behind the stock market rise. the banks'exposure to this sector appears to be lower. new instruments and techniques for spreading risks probably lead to a general reduction in the risk of serious financial crises. all in all, there are many indications that the real economy effects of the severe stock market fall will be limited. however, at the same time, it is not possible to write off the risk of financial imbalances having accumulated that could create problems in the future. it is possible that the asymmetry in monetary policy, which i have earlier mentioned, where the central banks act rapidly in response to a decline in asset prices, but