By Jeff Randall
After a year of grim financial news, it would be easy to dismiss the collapse of Lehman Brothers as just another bad day at the office. Easy, but wrong.
This is a rare defining moment, when regulators call the bluff of those who say that the demise of such an important bank will ruin our economic infrastructure. It is the day of reckoning.
In throwing Lehman to the dogs, US Treasury Secretary Hank Paulson is betting heavily that dire warnings of "contagion", "systemic risk" and "domino effect" are little more than special pleading from hitherto Masters of the Universe who would like the taxpayer to save their over-priced skins. It is quite a punt.
Soon enough we will discover if the core of Western finance is just an elaborate Ponzi scheme, underpinned only by new waves of suckers, or an imperfect but flexible machinery that, despite its flaws, has the capacity to withstand shocks.
Either way, it seems to me, Paulson was right to turn off the tap. If the system is rotten, why shore it up? If it's not, then it will - somehow - survive without more state aid.
The next test may not be far away. Right behind Lehman, in the departure lounge of life, is AIG, the giant insurance group, that lost $18.5 billion in the first nine months of this year.
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