The Systemic Risk Of Tim Geithner's And The Federal Reserve's Inconsistent Bailout Strategy During The Financial Crisis

From Bloomberg, "Geithner Still Can't Explain Lehman" by Mark Gilbert:

One of the most puzzling aspects of the financial crisis was the zig-zag-zig by the U.S. authorities, who saved Bear Stearns from bankruptcy, then let Lehman Brothers fall off the cliff only to rescue AIG a day later.

Geithner, who was at the helm of the New York Federal Reserve during the meltdown and then became President Barack Obama's Treasury secretary in its aftermath, has no time for "moral hazard fundamentalists" who object to bailouts for banks. "The truly moral thing to do during a raging financial inferno is to put it out," he argues. So why didn't he throw buckets of dollars on Lehman when it was blazing away?***Bear Stearns should have been allowed to go bust, economic Darwinism would have cleansed the system, and the world of finance would have taken a beating but emerged stronger for it. Instead, other bankers and other firms -- notably Dick Fuld at Lehman Brothers -- took the rescue as evidence that the Fed safety net would also be extended in their hour of need. Geithner acknowledges this, but reaches a different conclusion.***So because the collapse of Bear Stearns was a surprise and there was a willing buyer, Geithner was willing to pledge taxpayer money to get a deal done. But because Lehman was unloved and unwanted by its peers, Geithner felt he couldn't act.

That would make some kind of sense, I guess, if it wasn't for what happened a day after Lehman collapsed when the holes in AIG's balance sheet came to light. Geithner instantly found $85 billion to patch it up.***Either Bear Stearns should have been allowed to go bust, or Lehman should have been propped up. To me, Geithner's inconsistency still seems crazy after all these years.