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The assumption that Washington could and would resolve Lehman Brothers without a bankruptcy, as it had Bear Stearns, was the single biggest mistake in the series of mistakes in 2007 and 2008 that led to the financial panic and the ensuing epidemic of job losses.

The failure of Lehman Brothers demonstrated that liquidity provision by the Federal Reserve would not be sufficient to stop the crisis; substantial fiscal resources were necessary.

The blowback against a bailout of Lehman would have been fierce. It is often forgotten, but the prevailing wisdom the day after Lehman fell was that its collapse was a good thing.

In truth, in the fairy-tale version of bailing out Lehman, the next domino, A.I.G., would have fallen even harder. If the politics of bailing out Lehman were bad, the politics of bailing out A.I.G. would have been worse. And the systemic risk that a failure of A.I.G. posed was orders of magnitude greater than Lehman's collapse.

There's something called, 'resolution authority,' which gives the government the power to takeover a failing bank - something they didn't have pre-Lehman Brothers.

I often say to entrepreneurs, 'If Lehman Brothers were Lehman Brothers & Sisters, it wouldn't have gone into bankruptcy.'

No one suggested Lehman deserved to be saved. But the argument has been made that the crisis might have been less severe if it had been saved, because Lehman's failure created remarkable uncertainty in the market as investors became confused about the role of the government and whether it was picking winners and losers.

Even if the government spends itself into bankruptcy and the economy still does not recover, Keynesians can always say that it would have worked if only the government had spent more.

The banking collapse was caused, more than anything, by bad government policy and the total failure of bad regulation, rather than by greed.

A.I.G. was even larger than Lehman, with a substantial presence in derivatives and debt markets, as well as in insurance markets.