George Mason University’s Tyler Cowen and Eliot Spitzer (former governor of New York and former Client 9) were on The Takeaway discussing the anniversary of Lehman’s collapse this morning.

Spitzer thinks that the federal government should break up big companies into small pieces so no company is too big too fail.

Let us finally say you cannot be that big. You should not be that interconnected, which is the word that is used these days basically the same thing. You can break them down on regional lines; break them down on business lines.

And here is Cowen, the voice of reason in this debate:

The key is to reintroduce market discipline and let creditors know that if their counter parties fail, they will take a loss. Weve been bailing out institutions since at least the 1990s. I dont think making them smaller is the answer. Lehman was not that big. And if you go back to Long-Term Capital Management in 1998, we bailed them out and they were a very small firm. So I dont think shrinking banks is the answer. The most we can do is have some very simple restrictions on leverage and send the message that bailouts will not be automatic.

and,

I would just note that consumers were part of the problem. That many of us were caught up in the euphoria and the bubble and many people thought they could take on more debt and buy any house they want and put down maybe zero money. And its easy enough to blame the banks, the regulators; all those criticisms make sense. But the problem was more systemic, was an overall excess of optimism and complacency in the entire economy, including consumers.

Listen to the whole thing here.