On Merrill and Lehman, Hank Paulson Makes the Right Move

train_wreck.JPGMonday morning's news is a earthquake-sized train wreck way up there on the Wall Street Richter scale. American International Group is scurrying for a buyer, venerable Merrill Lynch will be taken over by Bank of America and Lehman Brothers is bankrupt.

But the biggest whammy of all was delivered by Treasury Secretary Henry "Hank" Paulson on Sunday: no more federal bailouts.

Finally, someone has hit the brakes where they need to be hit. The federal government and taxpayers such as you and I can't go bankrolling or brokering the mistakes of Bear Stearns, Countrywide Financial, Fannie Mae and Freddie Mac. Sooner or later, the executives of these financial giants have to be held accountable.

True, they'll probably still float away on golden parachutes, but only when the bailouts end and the restructurings truly begin will we start to get out of this mess.

As Peter Morici, professor at the University of Maryland School of Business writes today: "Sooner or later after enough dominoes fall, compensation structures and business practices will return to more conservative norms of ten and twenty years ago. Only then will the credit crisis and the economy have a decent shot at full recovery."

Morici's right on this one. And so is Paulson.