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The Boston Globe

Business

Lessons from Lehman’s fall

Polarization threatens reform in financial system

The most important lesson of Lehman is that financial regulators, policy makers, and politicians should never tell themselves, “It can never happen here.” Financial crises are an equal opportunity menace that can strike rich and poor countries alike.

When a long, credit-fueled boom drives up stock and house prices to previously unimagined levels, never assume “This time is different.” Look closely, usually, it is not. The aftermath of deep systemic financial crises is almost invariably long and painful, with prolonged high unemployment and soaring government debt.

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